new statutory poawebinar handout

8/11/2019 New Statutory POAWebinar Handout

1/18

New Texas Statutory Power of Attorney

& Limitations on Use

Paul McNutt, Jr.

Executive Vice President

General Counsel


2/18

2

Powers of Attorney - Basics

A power of attorney is a written instrument wherebyone person, the principal, appoints another personto be his or her agent or attorney-in-fact for someparticular purpose, and further provides for theagents powers and duties.

The general rule is that the authority of the agent maynever be extended by mere construction beyondthat which is expressly stated or which is necessaryand proper to carry out the authority given.

Reese vs. Medlock, 27 Tex. 120, 123 (1863), Gouldy v. Metcalf, 7512 S.W. 830, 831 (Tex. 1889).

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Powers of Attorney - Basics

There are 3 basic types of Powers of Attorney

General Gives general authority, and is often too vague

for Title Company purposes.

Special Authorized very narrow authority to do a

specific act. Sometimes called a specific power of

attorney. It must give the exact description of the act.

Durable Specifically states that it is not effected by the

principals subsequent disability or incapacity.What we Prefer is a Specific Durable Power of

Attorney.


3/18

4

Powers of Attorney New Statutory

Durable Power of Attorney Form

Effective 1/1/2014, a revised Statutory DurablePower of Attorney form, is set forth in Section

752.051 of the newly created Texas Estate

Code.

Use of the statutory form, with language

referencing the statute, expands the authority

of the power of attorney to include the

expanded descriptions of authority set forth

in Chapter 752 of the Estate Code.

Power of Attorney-New Statutory Power

of Attorney Form Effective 1/1/2014.

The principal change by this new form is it

requires initialing the sections chosen to be

used in order to be effective.

Section (N) if initialed provides for all of (A)

through (M) to be effective, therefore not

requiring initialing the individual sections

above.

This new form is the only form of Statutory

Power of Attorney in Texas, effective

1/1/2014.5


4/18

Power of Attorney-Former Statutory

Power of Attorneys being offered.

As any Statutory Power of Attorney previouslyexecuted can still be used, if still effective,

you should be careful to review the date of

the POA, and accept the former form of

Statutory POA only if executed before

1/1/2014.

As the Probate Code was changed over to an

Estate Code 1/1/2014, references to the

Probate Code in the heading must be only on

POAs executed before 1/1/2014.6

Power of Attorney-New Statutory Power

of Attorney Form Effective 1/1/2014.

Initialing is the most prominent new

requirement of the new Statutory Durable

POA form.

Other new features include pages describing

the agents duties and liability to the principal.

If asked to use the new form, care must betaken that all parts of the form are included,

and nothing is changed or altered unless by

an attorney or the party.

7


5/18

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Powers of Attorney

When You Cannot Use Them

Death of the principalIf Terminated or Revoked -

Expired under its terms. Be sure to see if it has

a fixed term and that the date is not past.

Actual revocation by the principal

If the Spouse is the agent, by divorce or

annulment of the marriage.

Appointment of a Guardian or TemporaryGuardian by a court.

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Powers of Attorney


Self Dealing by the Agent

When the Agent:

Deals with the Principals property for his own

benefit.

Conveys the Principals property to themselves.

Releases a mortgage made by the agent in favor

of the principal.


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Powers of Attorney


Self Dealing by the AgentWhen the Agent -

Executes a gift deed, unless specifically allowed

by the POA.

Executes a mortgage for the principal or

releases a mortgage owned by the principal

without consideration.

Mortgages Principals property to him or herself.

Delegates agents authority to someone else,unless specifically allowed by the POA.

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Powers of Attorney


When the Principal is a Fiduciary withoutAuthority to Delegate

An Independent Administrator or Executor of anestate cannot delegate authority through a POA.

A guardian of a person or estate may not give aPOA for a person to act for them. The Court canappoint a new guardian.

A trustee of a trust cannot delegate authorityunless the trust agreement we review specificallyauthorizes the trustee to do so. A successortrustee can act instead as authorized in the trust.


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Powers of Attorney

Oral Ratification In order to avoid fraud, and insure that the

principal is alive on the day of closing, wetypically require our closers to confirm viatelephone that the principal is both alive and isaware of the transaction the POA is being usedon the day of closing.

Your principal can expect a call the day ofclosing.

We try to ratify via e-mail for soldiers who areoverseas in a combat zone, as close to theclosing time as possible.

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Powers of Attorney

Military Powers of Attorney Military POA is executed under federal law and

says they can be notarized by a JAG Notary.

In order to accept a JAG notary, the person musteither be enlisted in the military or be able toprove they are a bona fide contractor for themilitary, employed outside the United States orits territories.

Texas has a specific law allowing ANYcommissioned officer of superior rank to notarizeif the principal is enlisted, without a notary seal ofany type. We typically require a military ordependent ID to validate this type of notary.


8/18

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Powers of Attorney Use for Home

Equity Loans Restricted

Home Equity Loans - The Texas Constitutionprovides the loan must be closed in a titlecompany, attorneys office or lenders office.

In a decision issued by the Supreme Court,ACORN:Finance Commn of Tex. v. Norwood,

it was held the POA must have been executed at thesame location required for the loan itself.

Therefore, we are limited in use of POA on HomeEquity loans by this decision, and by our TDIProcedural Rules for Endorsement T-42 and T-42.1.

POA- Home Equity Loans T-42

Endorsement Restrictions

Home Equity Loans require we issue a T-42

endorsement. However subparagraph (f)

cannot be given unless the loan is closed at

the office of the title company, per P-44 C.

Therefore to use a POA for an HEL, we must

require the execution of the POA to be done

at the office of the title company.

This is required because of the Texas

Supreme Court decision in Acorn above.

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9/18

POA Home Equity Loans T-42.1

Endorsement Restrictions

If we cannot issue with T-42 (f) we musteliminate all of T-42.1 sub-pargraphs (a)-(h)

and (l) in order to insure.

This requires the lender change their closing

instructions to allow the limited T-42 and the

elimination of the sections of T-42.1.

Any POA must be executed at the office of the

lender or the title company and we must

obtain proof of the place of execution.

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POA-Home Equity Loans Restricted

Use of Military POAs, executed elsewhere, or

Durable POAs executed long before the

current transaction, is eliminated by the

Supreme Court decision.

We must have a specific POA for the current

transaction, executed at our office to insure

with all sections of T-42.

If the lender closes their own deal, and agrees

to eliminate T-42 (f), you can insure, but only

if the POA is executed at the lenders office.23


10/18

POA for Mechanics Lien Contracts on

Homestead Property

The Texas Constitution requires for theexecution of a Mechanics Lien Contract by

owners on their homestead the Contract

must be executed at the office of a title

company, an attorneys office, or the lender.

We therefore must require that any POA must

therefore also be executed at the same

location, and we must have evidence of the

place of execution to insure the loan.

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POA for Reverse Mortgage-Limitations

The Texas Department of Insurance

Procedural Rules only allow under T-43

endorsement section (ii)-(iv) to be given if the

closing takes place in the office of the title

company. This is set out in P-45 E.

Therefore, if a POA is used for a reverse

mortgage we require that the POA must have

also been executed at the office of the title

company, and must be specific to the deal.

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Powers of Attorney

Specific Problems

No Original Power of Attorney

No closing, as no presumption exists that a

person has given anyone authority to convey.

It is a requirement that the Power of Attorney be

filed in the Real Property Records of the County

of the land, with the sale or loan instruments.

Once filed of record, a certified copy isconsidered the same as an original for all legal

purposes.


12/18

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Powers of Attorney

Specific Problems

Improper AcknowledgmentExpired Notary Stamp

Notary signs in the principals place.

Military officer notarizes without stamp and fails

to designate location or rank.

JAG Notary stamps a civilian POA and does

not designate location.

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Powers of Attorney

Specific Problems

Lack of a Heading on a Statutory Power of

Attorney

Unless the Statutory Power of Attorney contains

the heading that references the Texas Power of

Attorney Act, it does not incorporate the

language in the act, therefore none of the terms

are defined. This applies to both the new Estate Code

Statutory Durable POA, and the former Statutory

POA under the Probate Code.


13/18

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Powers of Attorney

Specific Problems-Initials

From 1993 to 1997, the Texas statutory power of attorney formneeded each category of authority initialed. We still see thisform floating around, and often people do not initial thecorrect parts of it, making it void. If you have blanks next tothe individual sections, make sure the right ones wereinitialed.

The Statutory Durable POA form adopted in 1997 providesthat the agent has the authority unless a provision is markedout, so we rarely have issues with the form.

Now the new Statutory Durable POA, effective 1/1/2014,requires again the use of initials, and will be void unlessinitialed. Care in review must be made, for initials in thecorrect paragraphs for your transaction.

Powers of Attorney-Specific Problems

Provision for Only Effective if Disabled

The new Statutory Power of Attorney, as well

as the former form, had a place to select

whether the POA was effective immediately,

or would only be effective if the party later

became disabled.

We do not insure based on any future disability

POA, and require legal action be taken for a

guardian to be appointed instead.

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14/18

STATUTORY DURABLE POWER OF ATTORNEY

NOTICE: THE POWERS GRANTED BY THIS DOCUMENT ARE BROAD AND SWEEPING.THEY ARE EXPLAINED IN THE DURABLE POWER OF ATTORNEY ACT, SUBTITLE P, TITLE

2, ESTATES CODE. IF YOU HAVE ANY QUESTIONS ABOUT THESE POWERS, OBTAIN

COMPETENT LEGAL ADVICE. THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO

MAKE MEDICAL AND OTHER HEALTH-CARE DECISIONS FOR YOU. YOU MAY REVOKETHIS POWER OF ATTORNEY IF YOU LATER WISH TO DO SO.

You should select someone you trust to serve as your agent (attorney in fact). Unless you specify

otherwise, generally the agent's (attorney in fact's) authority will continue until:

(1) you die or revoke the power of attorney;

(2) your agent (attorney in fact) resigns or is unable to act for you; or

(3) a guardian is appointed for your estate.

I, __________ (insert your name and address), appoint __________ (insert the name and address of theperson appointed) as my agent (attorney in fact) to act for me in any lawful way with respect to all of thefollowing powers that I have initialed below.

TO GRANT ALL OF THE FOLLOWING POWERS, INITIAL THE LINE IN FRONT OF (N) AND

IGNORE THE LINES IN FRONT OF THE OTHER POWERS LISTED IN (A) THROUGH (M).

TO GRANT A POWER, YOU MUST INITIAL THE LINE IN FRONT OF THE POWER YOU ARE

GRANTING.

TO WITHHOLD A POWER, DO NOT INITIAL THE LINE IN FRONT OF THE POWER. YOU

MAY, BUT DO NOT NEED TO, CROSS OUT EACH POWER WITHHELD.

____ (A) Real property transactions;

____ (B) Tangible personal property transactions;____ (C) Stock and bond transactions;

____ (D) Commodity and option transactions;

____ (E) Banking and other financial institution transactions;____ (F) Business operating transactions;

____ (G) Insurance and annuity transactions;

____ (H) Estate, trust, and other beneficiary transactions;

____ (I) Claims and litigation;____ (J) Personal and family maintenance;

____ (K) Benefits from social security, Medicare, Medicaid, or other governmentalprograms or civil or military service;

____ (L) Retirement plan transactions;

____ (M) Tax matters;

____ (N) ALL OF THE POWERS LISTED IN (A) THROUGH (M). YOU DO NOTHAVE TO INITIAL THE LINE IN FRONT OF ANY OTHER POWER IF YOU

INITIAL LINE (N).


15/18

Statutory Durable Power of Attorney Page 2

SPECIAL INSTRUCTIONS:

Special instructions applicable to gifts (initial in front of the following sentence to have it apply):

____ I grant my agent (attorney in fact) the power to apply my property to make gifts outrightto or for the benefit of a person, including by the exercise of a presently exercisable

general power of appointment held by me, except that the amount of a gift to an

individual may not exceed the amount of annual exclusions allowed from the federal gifttax for the calendar year of the gift.

ON THE FOLLOWING LINES YOU MAY GIVE SPECIAL INSTRUCTIONS LIMITING OREXTENDING THE POWERS GRANTED TO YOUR AGENT.

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

UNLESS YOU DIRECT OTHERWISE ABOVE, THIS POWER OF ATTORNEY IS EFFECTIVE

IMMEDIATELY AND WILL CONTINUE UNTIL IT IS REVOKED.

CHOOSE ONE OF THE FOLLOWING ALTERNATIVES BY CROSSING OUT THEALTERNATIVE NOT CHOSEN:

(A) This power of attorney is not affected by my subsequent disability or incapacity.

(B) This power of attorney becomes effective upon my disability or incapacity.

YOU SHOULD CHOOSE ALTERNATIVE (A) IF THIS POWER OF ATTORNEY IS TO BECOME

EFFECTIVE ON THE DATE IT IS EXECUTED.

IF NEITHER (A) NOR (B) IS CROSSED OUT, IT WILL BE ASSUMED THAT YOU CHOSE

ALTERNATIVE (A).

If Alternative (B) is chosen and a definition of my disability or incapacity is not contained in this power

of attorney, I shall be considered disabled or incapacitated for purposes of this power of attorney if a

physician certifies in writing at a date later than the date this power of attorney is executed that, based on

the physician's medical examination of me, I am mentally incapable of managing my financial affairs. Iauthorize the physician who examines me for this purpose to disclose my physical or mental condition to

another person for purposes of this power of attorney. A third party who accepts this power of attorney

is fully protected from any action taken under this power of attorney that is based on the determinationmade by a physician of my disability or incapacity.


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I agree that any third party who receives a copy of this document may act under it. Revocation of the

durable power of attorney is not effective as to a third party until the third party receives actual notice of

the revocation. I agree to indemnify the third party for any claims that arise against the third party

because of reliance on this power of attorney.

If any agent named by me dies, becomes legally disabled, resigns, or refuses to act, I name the following(each to act alone and successively, in the order named) as successor(s) to that agent:

_________________________________________________________________________.

Signed this ______ day of __________, _____________

___________________________

(your signature)

State of _______________________

County of ______________________

This document was acknowledged before me on ____________(date) by __________________ (name

of principal).

__________________________________________

(signature of notarial officer)

(Seal, if any, of notary) ________________________________________

(printed name) ________________________________________

My commission expires: ______________


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IMPORTANT INFORMATION FOR AGENT (ATTORNEY IN FACT)

Agent's Duties

When you accept the authority granted under this power of attorney, you establish a "fiduciary"

relationship with the principal. This is a special legal relationship that imposes on you legal duties thatcontinue until you resign or the power of attorney is terminated or revoked by the principal or by

operation of law. A fiduciary duty generally includes the duty to:

(1) act in good faith;

(2) do nothing beyond the authority granted in this power of attorney;

(3) act loyally for the principal's benefit;

(4) avoid conflicts that would impair your ability to act in the principal's best interest; and

(5) disclose your identity as an agent or attorney in fact when you act for the principal bywriting or printing the name of the principal and signing your own name as "agent" or

"attorney in fact" in the following manner:

(Principal's Name) by (Your Signature) as Agent (or as Attorney in Fact)In addition, the Durable Power of Attorney Act (Subtitle P, Title 2, Estates Code) requires you to:

(1) maintain records of each action taken or decision made on behalf of the principal;

(2) maintain all records until delivered to the principal, released by the principal, ordischarged by a court; and

(3) if requested by the principal, provide an accounting to the principal that, unless otherwise

directed by the principal or otherwise provided in the Special Instructions, must include:

(A) the property belonging to the principal that has come to your knowledge or into

your possession;

(B) each action taken or decision made by you as agent or attorney in fact;

(C) a complete account of receipts, disbursements, and other actions of you as agent

or attorney in fact that includes the source and nature of each receipt,disbursement, or action, with receipts of principal and income shown separately;

(D) a listing of all property over which you have exercised control that includes an

adequate description of each asset and the asset's current value, if known to you;

(E) the cash balance on hand and the name and location of the depository at which the

cash balance is kept;

(F) each known liability;

(G) any other information and facts known to you as necessary for a full and definite

understanding of the exact condition of the property belonging to the principal;

and

(H) all documentation regarding the principal's property.


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St t t D bl P f Att P 5

Termination of Agent's Authority

You must stop acting on behalf of the principal if you learn of any event that terminates this power ofattorney or your authority under this power of attorney. An event that terminates this power of attorney

or your authority to act under this power of attorney includes:

(1) the principal's death;

(2) the principal's revocation of this power of attorney or your authority;

(3) the occurrence of a termination event stated in this power of attorney;

(4) if you are married to the principal, the dissolution of your marriage by court decree ofdivorce or annulment;

(5) the appointment and qualification of a permanent guardian of the principal's estate; or

(6) if ordered by a court, the suspension of this power of attorney on the appointment and

qualification of a temporary guardian until the date the term of the temporary guardian

expires.

Liability of Agent

The authority granted to you under this power of attorney is specified in the Durable Power of AttorneyAct (Subtitle P, Title 2, Estates Code). If you violate the Durable Power of Attorney Act or act beyond

the authority granted, you may be liable for any damages caused by the violation or subject to

prosecution for misapplication of property by a fiduciary under Chapter 32 of the Texas Penal Code.

THE ATTORNEY IN FACT OR AGENT, BY ACCEPTING OR ACTING UNDER THEAPPOINTMENT, ASSUMES THE FIDUCIARY AND OTHER LEGAL RESPONSIBILITIES OF AN

AGENT.

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