Financial Power of Attorney

Definitions

Principal - person creating the document
Agent or Attorney-in-fact - person acting on behalf of the principal

A power of attorney is a legal document to appoint an "agent" or "attorney-in-fact" to make decisions for the creator of the document, who is called the principal. {The attorney-in-fact does not need to be a lawyer. It can be a family member with no law background}.

If a person becomes incapacitated in Texas without a valid power of attorney, the state may appoint a guardian or conservator.

Limited power of attorney documents "limit" to which actions an attorney-in-fact may perform. A common use is when the principal is traveling and has specific business back home that needs attention.
General power of attorney documents allow a very wide list of actions to be undertaken by the attorney-in-fact.
Durable power of attorney documents allow the agent to continue acting when the principal is incapacitated.

The attorney-in-fact is not allowed to transfer the principal's property to the attorney-in-fact unless specific gifting language is present in the power of attorney. Heavy penalties exist under Texas law for an attorney-in-fact who steals property from the principal or acts not in the best interests of the principal.

Third parties in a power of attorney refer to other people or institutions such as banks, accountants or lawyers that the attorney-in-fact works with during the principal's incapacitation. If the third party acts in good faith based on the actions of the attorney-in-fact, the third party is not held liable to the principal.

Financial Power Of Attorney Requirements

A power of attorney must be notarized and witnessed by two people, one of whom is not related to the principal nor entitled to any part of the estate.

The effective date of a power of attorney can be immediately upon signing or at some event in the future (this is called a springing power of attorney). The attorney-in-fact may face the difficulty of proving the "springing conditions" have been met to a third party, so take that consideration into effect when determining an effective date.

A power of attorney is no longer valid when the principal becomes incapacitated, unless the document is a durable power of attorney. Otherwise, a power of attorney will stay in effect until revoked, the principal passes away, when a stated time has passed or when a court appoints a guardian of the estate.