What is a Power of Attorney?

Transcript of Interview: “What is a Power of Attorney?”

Mike Barnes: You know, once you find out that you’re having to deal with your parents’ financial stuff and other stuff involving money and everything about their lives, you find out quickly that you need the power of attorney to get things done in so many ways.

Kim Barnes: Absolutely, and it can be a little bit confusing to know exactly what it does and what it doesn’t do. So, we are bringing in an expert, and I’m excited to introduce you to Sarah Sulak with Stevler and Sulak. She has an estate attorney practice, and we’re glad for you to be with us today to kind of help us understand exactly what a power of attorney is and what it isn’t. So, let’s start with what it is.

Sarah Sulak: Great, yeah, no thank you for having me on. Happy to be with you and talking about powers of attorney. In Texas, there are two types. There are medical powers of attorney and financial powers of attorney, also known as statutory durable powers of attorney, that I think we want to talk through today. A financial power of attorney or a durable power of attorney is a document by which a person can appoint an agent who can help manage their financial affairs if they can’t manage them themselves or just want some additional assistance. So, a power of attorney is a document that grants authority to someone you trust to buy and sell things on your behalf, pay bills on your behalf, and have access to financial information about you. It’s something that is a really critical tool when you’re thinking about aging parents or really anyone. I think durable powers of attorney are documents that everyone should have. None of us know what’s going to happen tomorrow. There could be an emergency situation where someone would need to access our information or manage finances for us for a short time or a long time. So, powers of attorney are really critical tools.

Kim Barnes: So, as a reminder, as we’re helping our parents navigate things, it’s probably a good idea to make sure that we have those things for our children and our spouses as well.

Mike Barnes: Yeah, I kind of laughed when my dad set up a power of attorney for my mom and dad 30-plus years ago. We didn’t need it forever and ever, and then, you know, when he got COVID in January and we were moving my mom into memory care, we needed it. But if we had waited until then, it would have been too late.

Sarah Sulak: That’s true. Yeah, there are important documents to do while you have the capacity to do them. The time to execute a power of attorney is when you’re not having any trouble managing your financial affairs or just starting to have trouble. Somebody’s got to have the capacity to understand and sign legal documents in order to create a power of attorney that is valid. So, it’s really something that we should all do when we’re healthy and well and hope that we don’t need to use it for a long time. Powers of attorney in Texas technically do not expire under the law. They can be many years old and still be valid. There are some financial institutions that get a little leery of using a very old power of attorney, but generally speaking, go ahead and do them when you can. They’re always good to have, and they do not expire.

Kim Barnes: And actually, you raise a great question because we do have people in our community that are outside of Texas. Are the laws different with powers of attorney in different states? Do they just need to be careful of what the rules are in the state where they live?

Sarah Sulak: They can be, and there are often statutory forms. In Texas, it certainly is. Powers of attorney created out of state should be valid in Texas. But when we’re dealing with financial powers of attorney, they’re really only as good as you can get financial institutions to accept them. The more comfortable a financial institution feels with the power of attorney, the more likely they are to honor it. In Texas, they do tend to feel more comfortable with the Texas form just because they see it more and they know how it works. But out-of-state powers of attorney are better than no powers of attorney. So, it’s always a good idea to try to use what you have. But if you plan to be in Texas for a long period of time and you’re able, it’s a great idea to go ahead and do a Texas power of attorney or whatever state you live in.

Mike Barnes: I feel like a lot of people hear “power of attorney” (POA) and they have this little vision of, “Oh my gosh, I’m trying to take over everything about my mom or my dad’s life.” And it doesn’t have to be that way. It has to be like when my dad had COVID, he was in the hospital for three days. We were able to do anything as far as paying a bill or writing a check or anything just because of that. So, give a couple more examples of good reasons why you should get a power of attorney.

Sarah Sulak: That’s a perfect example, and I’m glad that it worked for you in that moment. That is the prototypical example of somebody who is not necessarily incapacitated or totally unable to manage their affairs going forward. It could be that you’re going to have surgery and you’re going to be hospitalized. You’re going to be under anesthesia, and we don’t know how long that’s going to be. You want to be able to be prepared for a scenario where, even if you do come out of it quickly and you’re ready to go, you still may not want to be the one going to the bank or calling the bank or calling the health insurance company. It just makes things more convenient when you’ve got somebody appointed who can step in and help you when you need help. So, that’s a time when somebody who is perfectly capable of managing their own finances might still want a power of attorney just to make things a little easier. And then, on the other end of the spectrum, of course, there are folks who are losing capacity and feeling like they’re really not capable of managing their own finances anymore. They don’t trust themselves to manage their own finances, and they really want to turn it over to somebody else full-time. A power of attorney is the right tool in that situation as well.

Kim Barnes: So, what are the situations where we talked about what a POA does—what doesn’t it do?

Sarah Sulak: Good question. Like I said, powers of attorney work when they work and don’t when they don’t. Financial institutions are supposed to accept them. There are rules in our laws indicating that they’re supposed to be honored, but they don’t always work. There are a few things that powers of attorney cannot do, kind of rare situations. Sometimes you can’t file a lawsuit on someone’s behalf using a power of attorney. You cannot execute a will for somebody using a power of attorney. There are other kinds of transactions that sometimes you can or cannot do depending on the particular language of the power of attorney and what powers it grants or doesn’t grant. Certain types of transactions, and certainly doing other types of legal documents like wills, powers of attorney will not help you there, unfortunately.

Mike Barnes: Well, I was going to ask if there are different types of durable powers of attorney. For instance, Kim’s mom with a financial institution that we won’t name, but there was some trouble about her brother trying to close down an account, and they wouldn’t do it until we got a note from Kim’s mom’s doctor saying that she needed the power of attorney and that the kids were involved. So, do you need to be careful when you get a power of attorney to make sure that everything is set up exactly as it specifies?

Sarah Sulak: Yes, you should. Absolutely, and I’m sorry you had that experience. Unfortunately, it’s not uncommon. Financial institutions, understandably, are leery of accepting these documents for a lot of power on somebody else. One of the best things to do, what we encourage clients to do, is to make your power of attorney as user-friendly as possible. There are choices to make on the statutory power of attorney form about which powers you want to grant to your agent. We always recommend that if you’re appointing someone you trust, you grant them all of the possible powers. There’s also a part of the document that really trips people up, that asks when you want the power of attorney to go into effect—whether you want it to go into effect immediately or only upon your disability or incapacity. Most people think they want it to go into effect when they become disabled or incapacitated. They’re managing their affairs just fine until then, and while that’s absolutely true, if you don’t let it go into effect immediately, relatives can find themselves in the situation that you did, where you’re having to prove to a financial institution that the person who created the document is now incapacitated. Some financial institutions will go as far as to require a letter from a doctor or even an order from a court determining incapacity, which of course is challenging and costly to get and kind of undermines what the power of attorney is supposed to be for—it’s supposed to make things easier. So, my advice to clients is always to let powers of attorney go into effect immediately. Again, it doesn’t mean you’re handing the reins over to somebody else and that you’re never going to touch your own finances again. It just means that if the person you’ve named under the document needs to step in quickly in an emergency, they’re empowered to do that.

Kim Barnes: And what can happen if you don’t have a POA?

Sarah Sulak: Great question. One of the primary reasons to do powers of attorney, in addition to making things easier in the sense of what they grant you access to and allow you to do, is what they allow you to avoid, and that is court-monitored guardianship. We’re really fortunate in Central Texas—we have great probate courts and guardianship judges. But even under the best of circumstances, guardianship is expensive, it’s time-consuming, it requires you to go to several court hearings, and you’re asking the court for permission to do a lot of the things that you could do using a power of attorney if you had one, like buy and sell property, pay bills, manage accounts, manage investments. So, having a good statutory durable power of attorney in place in most cases eliminates the need for a guardianship of someone’s estate. If you can avoid a guardianship, you’re avoiding a lot of expense and a lot of headaches. It’s always better to avoid guardianship if you can.

Kim Barnes: Because you really can’t manage a guardianship without an attorney.

Sarah Sulak: That’s true. Certainly, if you’re talking about a guardianship of someone’s estate or dealing with their financial assets, you really do need an attorney to guide you through that process.

Kim Barnes: And so, if you just spent the time and the expense creating the POA on the front end, hopefully that saves you some of those other expenses and a lot of headaches potentially if you’re having to do guardianship.

Sarah Sulak: Absolutely. That’s very well said.

Mike Barnes: Yeah, and last thing—we talk about headaches. A lot of times, having siblings can cause a headache because you want to do something, your brother wants to do something else, I want to do something, my sister wants to do something else. How do you resolve, as an attorney, who gets the power of attorney as far as siblings? Should it be both siblings or everyone? How do you handle that?

Sarah Sulak: Great question. It is possible to name co-agents under a durable power of attorney. So, if you’ve got a parent who really can’t choose among children who’s the best choice, you can appoint co-agents. That tends to make things a little more difficult because now you’ve got two people that the banks have to look to for permission. If they disagree, sometimes a bank will just say, “I can’t; I’m not going to resolve this dispute.” So, I do tend to encourage people to choose one person. You can name backups on the document, and the people that you name can resign at any time. Often, parents are worried about overburdening their children by making them their agent under a power of attorney. In that situation, we always tell people, name your first choice first, name a backup. If your first choice needs to step down, somebody else can step up. The best choice is the person executing the document. It’s who do you trust the most, who has the most knowledge of financial affairs, and who’s going to feel most comfortable and competent in those scenarios. Often, in a family, you’ve got one person who’s the right choice for, say, the healthcare power of attorney because they know the doctors, they know the medication, they are really familiar with that aspect. But when it comes to managing accounts and managing investments, they feel really out of their depth. Often, there are different hats that people wear in families, different areas of expertise. So, it’s a good idea to trust those skills and talents and to rely on people to do what they do best. But the most important thing is trust. A power of attorney confers a lot of power on the agent, and so the best choice for your agent is always somebody that you truly trust to have your best interest at heart at all times.

Mike Barnes: Another reason to have that conversation early—not until it’s too late.

Kim Barnes: That’s right. Great information.

Mike Barnes: Thank you so much. We really appreciate all of your tips.

Sarah Sulak: Thank you so much.

Kim Barnes: Just goes to show that this is just one piece of the planning process of all the legal paperwork documents that you want to have all together. But having that POA, obviously you want it before you need it.

Mike Barnes: Yeah, again, something you can’t do too early. So, get it done now, no matter how old you are, no matter how old your parents are. Don’t wait until it’s too late.

Kim Barnes: That’s right. Well, let us know what other topics you want us to cover, and we’ll see you next time.

*This transcript is auto-generated. Please excuse any typos or mistakes.