Key Considerations When Creating a Power of Attorney: Financial and Healthcare Decisions
In life, there may come a time when an individual is unable to make financial or healthcare decisions for themselves due to illness, injury, or incapacity. Planning ahead assures that personal, financial, and medical matters are handled according to one’s wishes. One of the most effective tools for this purpose is the Power of Attorney (POA).
Understanding the nuances is essential to making sure your wishes are honored, your assets protected, and your health decisions respected. At Tefera Law Firm, PLLC in Colleyville, Texas, we’re dedicated to making sure you’re protected when creating a power of attorney. Here, we’ll go through the major considerations when drafting and executing a Power of Attorney.
Power of Attorney in Texas
A Power of Attorney is a legal document that allows a person (the "principal") to authorize another individual (the "agent" or "attorney-in-fact") to act on their behalf in legal, financial, or medical matters. Texas recognizes several types of POAs, with two primary ones relating to our focus:
Durable Power of Attorney for financial matters
Medical Power of Attorney
Each serves a distinct purpose, and together, they offer a comprehensive solution for managing an individual’s affairs when they can no longer do so themselves.
The Legal Structure in Texas
POAs in Texas are governed primarily by the Texas Estates Code. Two important statutes include:
Texas Estates Code, Title 2, Subtitle P — Covers Durable Powers of Attorney for financial decisions.
Texas Health and Safety Code, Chapter 166 — Covers Medical Powers of Attorney and Advance Directives.
These laws set the standards for creating, executing, and using a POA in the state. A POA must be created with strict adherence to Texas law to confirm its validity and enforceability.
Durable Power of Attorney for Financial Decisions
What It Covers
A Durable Power of Attorney for finances enables the agent to perform a wide range of actions, such as:
Managing bank accounts
Paying bills and taxes
Buying or selling property
Handling investments
Operating a business
Managing retirement accounts
Applying for government benefits (e.g., Social Security, Medicaid)
The term "durable" means that the POA remains effective even if the principal becomes mentally incapacitated.
Requirements for a Valid Financial POA
To create a legally valid Durable POA in Texas, the following must occur:
The principal must have legal capacity: They must understand the nature and consequences of the POA.
Written document: It must be in writing.
Signature and notarization: The principal must sign the document in the presence of a notary public.
Specific powers granted: Texas law requires that powers be specifically stated; general or blanket statements are often insufficient.
Durability language: The document must explicitly state that it remains effective upon the principal’s disability or incapacity.
Texas provides a statutory form for Durable POAs, but custom documents are also permitted if they meet legal requirements.
Scope and Limitations
The principal can decide how much authority to give:
Broad authority: Managing almost all aspects of finances.
Limited authority: Handling only specific tasks, like selling a house or managing a certain account.
Importantly, even though a POA grants authority, the agent must always act in the principal’s best interest and avoid conflicts of interest.
Medical Power of Attorney (Healthcare Decisions)
What It Covers
A Medical Power of Attorney allows the agent to make healthcare decisions on behalf of the principal if they become unable to make those decisions themselves. It can cover:
Consent to or refusal of medical treatment
Decisions about surgeries, medications, and hospital care
End-of-life decisions, subject to other advance directives (like a living will)
The agent’s authority under a Medical POA only becomes active upon the principal’s incapacity, as determined by a physician.
Requirements for a Valid Medical POA
In Texas, to create a valid Medical POA, the following are necessary:
Written document: Oral grants of authority aren’t sufficient.
Signature: The principal must sign the document or direct someone to sign on their behalf.
Witnesses: Two qualified adult witnesses must be present, or it must be notarized. Certain individuals (e.g., relatives, healthcare providers) may not serve as witnesses.
Capacity: The principal must be mentally competent at the time of execution.
Texas provides a statutory form for Medical POAs under Section 166.164 of the Health and Safety Code, but a custom POA is acceptable if it complies with the statutory requirements.
Choosing the Right Agent
Choosing an agent is perhaps the most critical aspect of creating a POA. The agent must be:
Trustworthy and responsible
Familiar with the principal’s values and wishes
Capable of making tough decisions under stress
The principal should discuss their wishes with the agent beforehand and confirm they’re willing to serve. Backup agents can also be named in case the primary agent is unable or unwilling to act.
Important Considerations
Springing vs. Immediate POA
In Texas, a financial POA can be either:
Immediate: Effective upon signing.
Springing: Becomes effective upon the principal’s incapacity, usually requiring a physician’s certification.
Most Medical POAs are inherently springing — they only take effect when the principal cannot make healthcare decisions.
Revocation and Expiration
A POA remains in effect until:
The principal revokes it in writing.
The principal dies.
A court invalidates it.
The stated expiration date occurs (if any).
It’s vital to inform agents and institutions when a POA is revoked.
Limitations on Powers
Texas law restricts agents from making certain decisions unless explicitly granted, such as:
Creating or changing wills
Voting in public elections
Making gifts from the principal’s assets (unless allowed)
For healthcare, an agent cannot consent to certain psychiatric treatments unless the Medical POA expressly allows it.
Step-by-Step Guide to Creating a Financial and Medical POA in Texas
Step 1: Decide on the Scope
Determine which decisions you want your agent to be able to make and whether you want the POAs to be immediate or springing.
Step 2: Choose Your Agent
Select a trustworthy agent and, ideally, an alternate. Make sure they understand the responsibilities.
Step 3: Draft the Documents
Use the Texas statutory forms or consult an attorney to create customized documents that fully capture your intentions. Customization may be necessary for intricate estates or specific healthcare instructions.
Step 4: Execute the Documents
For a Durable Financial POA:
Sign before a notary public.
For a Medical POA:
Sign before two qualified witnesses or a notary public.
Retain copies and provide them to your agents, healthcare providers, banks, and other relevant parties.
Step 5: Notify Relevant Parties
Banks, healthcare providers, insurance companies, and other institutions should receive copies of the POA so they recognize the agent’s authority.
Step 6: Review Periodically
Circumstances change. Review and, if needed, update your POA documents every few years or after major life events like marriage, divorce, relocation, or a significant health change.
Special Topics
Out-of-State Recognition
Texas generally recognizes POAs validly executed in another state. However, if you move to Texas, it’s a good idea to execute new POAs under Texas law to avoid complications.
Guardianship Proceedings
If a person becomes incapacitated without a valid POA, a court guardianship may be necessary — a time-consuming and expensive process. A properly drafted POA can often prevent the need for guardianship.
Elder Abuse and POA
While POAs provide powerful tools for helping loved ones, they can also be abused. Texas law allows interested parties to petition a court to review an agent’s actions and revoke authority if necessary.
Creating a Power of Attorney for financial and healthcare decisions in Texas is an essential component of responsible planning. By executing these documents while competent, individuals can confirm their personal and financial interests are protected if they become incapacitated.
The process requires careful selection of agents, compliance with Texas laws, and clear communication of one’s wishes. Consulting an experienced estate planning attorney can provide valuable guidance and help avoid common pitfalls.
Contact Us Today
Taking these steps today can provide peace of mind tomorrow, not just for yourself, but for your loved ones who may one day need to act on your behalf. I, Chrissy Tefera, serve clients in Tarrant County, Texas, and we’re here to help you protect yourself and your assets when deciding on a Power of Attorney. Contact us today to get started on a consultation.