Navigating Power of Attorney Abuse in Texas: Your Comprehensive Guide

Navigating Power of Attorney Abuse in Texas: Your Comprehensive Guide

Power of Attorney Abuse

In Texas, entrusting someone with a power of attorney is a significant decision granting substantial control over personal affairs. However, it is common to witness instances where this privilege is misused, leading to many complications and disputes. As someone who may be grappling with the repercussions of power of attorney abuse, it is imperative to understand your legal standing and the avenues available for redress. This post aims to discuss revoking a power of attorney in Texas. You can confidently and securely steer through this challenging time when armed with the proper knowledge.

You gave the Power of Attorney.

You can revoke the power of attorney if you are the one who gave the power of attorney and are dissatisfied with the person to whom you gave it. The best way to do this is to see your attorney and have him prepare a revocation of power of attorney.

A loved one gave the Power of Attorney.

A more complex situation arises when a loved one gives a power of attorney. That is especially true when the loved one is now incompetent to handle their affairs and cannot revoke the power of attorney. What do you do in that situation? A 2023 Texas case will illustrate how that situation can be handled.

The Fort Worth Court of Appeals ruled that someone other than the person who gave the Power of Attorney could ask the court to remove someone who held a power of attorney.

Facts of the case.

Trudy, who experienced “progressive mental deterioration . . . consistent with her dementia diagnosis… While still competent, Trudy executed a statutory durable power of attorney designating her daughter Linda as power of attorney.

Later, daughter Dianna moved in with Trudy and has been living rent-free in a house owned by Trudy. Dianna had prepared a quitclaim deed from Trludy to her, which Adult Protective Services later found to have involved financial exploitation.

After the deed, Dianna had Trudy execute a new power of attorney in favor of Dianna that removed Linda. Based on the Power of Attorney, Dianna took control of some of Trudy’s bank accounts, social security payments, and credit cards.

Brother Kyle filed a guardianship application and sought to be appointed Trudy’s guardian. He asked for temporary relief, claiming that Dianna had taken a significant portion of Trudy’s net worth. The allegations were that Trudy didn’t have the mental ability to change her Power of Attorney when she signed the new power of attorney in favor of Dianna. Hence, Linda, not Dianna, was the true power of attorney.

After a two-day bench trial, the probate court entered its judgment that because Dianna had “breached her fiduciary duty,” Dianna was “removed as agent in all powers of attorney for health care and all durable powers of attorney executed by” Trudy. See Tex. Est. Code Ann. § 753.001 (empowering probate court to remove agent upon finding breach of fiduciary duties owed to principal).

Appeal

Dianna appealed. She claimed that Kyle didn’t plead breach of fiduciary duty. The appeals court rebuffed that argument. Since there was no question that Dianna was a fiduciary, the burden was on her, not Kyle, to show that her actions did not breach her fiduciary duties. Additionally, the court noted that Dianna did not contest the findings of fact that she had been living rent-free in Trudy’s house and was paying the utilities with Trudy’s money—a breach of her fiduciary duty, which was sufficient to remove her as the Power of Attorney.

You can learn about guardianships here and here.

Definition of Guardianship

What is Guardianship?

Some people need help managing their daily affairs because of their age, a disease or an injury. If this happens, a court of law may appoint a guardian for them.

Guardian and ward are legal terms used to indicate the relationship between someone who protects another (the guardian) and the person being protected (the ward). In Texas, the process to appoint a guardian includes:

  • Filing an application with a court
  • Having a hearing before a judge
  • Having a judge appoint a guardian, if one is needed

Because having a guardian takes away a person’s rights, it should be the last and the best choice to protect someone. Before asking a court to appoint a guardian, other options are usually tried first, such as:

  • Finding someone to help the person pay bills and manage money
  • Finding someone to help the person make decisions, including health care decisions
  • Enrolling the person in available community services, including Medicaid programs

Once a guardian is appointed, it often becomes permanent. However, if things change significantly, a judge can decide a guardian is no longer needed.

Texas Spendthrift Trust

Texas Spendthrift Trust

What is a Texas spendthrift trust?

A Texas spendthrift trust is authorized by the Texas Property Code. It is set up by the “grantor.” The trust will name one or more “beneficiaries” of the trust property. The beneficiaries will receive the trust property at a given time, i.e. reaching the age of 35. Sometimes, a trust will exist for a beneficiary’s life with the property going to his children when he dies. A trust is administered by a trustee who may also be one of the beneficiaries. However, if at any time the trustee and the beneficiary are they same person, the trust ends.

Such trust usually make a payment for the “health, support, maintenance and education” of the beneficiary to take care of the beneficiary’s needs during the existence of the trust.

Protection from creditors

A Texas spendthrift trust  is a trust set up to protect the beneficiary from his creditors. For instance, there is a child that does not manage his property correctly, so he is always being sought by his creditors to pay his bills. His parents want to leave him property but are afraid that his creditors will get the property because of the mismanagement of the child.

A Texas spendthrift trust is the answer. In its most basic form, a Texas spendthrift trust provides for the child but is not available to the child’s creditors. A creditor can sue the child but cannot get to the assets of the trust.

A person cannot set up a Texas spendthrift for themselves. However, some states do allow a person to create a spendthrift trust for themselves.

Learn how to Make a Trustee Reveal the Trust Assets and his Actions.

A Power of Attorney Creates a Fiduciary Duty

A Power of Attorney Creates a Fiduciary Duty

A Power of Attorney Creates Fiduciary Duty

Texas courts recognize that a person with a power of attorney owes the principal (the person who gave the power of attorney) a fiduciary duty. The holder of the power of attorney owes her principal a high duty of good faith, fair dealing, honest performance, and strict accountability. When the fiduciary receives an alleged gift from the principal, the fiduciary has an extremely high burden to show that the gift was in the best interest of the principal. The courts have observed that the fiduciary relationship cast upon the profiting fiduciary the burden of showing the fairness of the transactions. By accepting both the role of fiduciary and gifts from the principal, the agent consents to have her conduct measured by a higher standard of loyalty.In one case, the fiduciary never acted under her power of attorney. Therefore, she claimed, she did not have to meet the high burden of a fiduciary to prove that the gifts she received from the principal were in the best interest of the principal. The court rejected these arguments. The court found that the holder of the power of attorney owed the principal a fiduciary duty based solely on the power of attorney whether or not it was ever exercised. This finding placed the burden on the holder to prove the transfer of the principal’s property to her was fair and in the best interest of the principal.

 

The violation of the duty that a holder of a power of attorney owes to the principal can result in a felony conviction. In one case, the facts were as follows: “Grace added Tyler as a signatory on her bank accounts, and executed a durable power of attorney naming Tyler as her “agent (attorney-in-fact).” The power of attorney gave Tyler power over all of Grace’s assets.” Tyler later misapplied the funds under her control by using some for her personal debts.

The criminal law in question, §32.45 of the Texas Penal Code says: “A person commits an offense if he intentionally, knowingly, or recklessly misapplies property he holds as a fiduciary or property of a financial institution in a manner that involves substantial risk of loss to the owner of the property or to a person for whose benefit the property is held.” Tyler claimed that she had no formal trustee relationship with Grace, and therefore a fiduciary relationship “may not have” existed. In ruling that the existence of the power of attorney alone created the fiduciary relationship, the court upheld her conviction.

Update: In a 2018 case, an appeals court upheld a decision that the person with a power of attorney breached his fiduciary duty when he withdrew funds from a bank account and put the funds in his own account. The court ruled that he converted the funds and had to return them. Conversion is the wrongful exercise of dominion and control over another’s property in denial of or inconsistent with one’s rights. “From the evidence, the trial court could have reasonably concluded that when (POA) withdrew the money from the joint account, (POA) was not acting in (principal’s) interests but was using the power of attorney to wrongfully exercise dominion and control over the money to the exclusion of, or inconsistent with, (the owner’s) rights.” No. 02-17-00138-CV. In 2019, the courts held that a person with a power of attorney who had the bank issue him a certified check that he put in his own account, breached his fiduciary duty. This was true even though the person from whom he had the power of attorney signed the check. 02-17-00138-CV.

 
 

What is a fiduciary in Texas

Basically, a fiduciary is someone on whom the law imposes the highest duty to act on behalf of another like an executor, administrator or trustee.

Fiduciary relationships can be formal such as partners, agents, executors, administrators, trustees, a holder of a power of attorney, etc.

Fiduciary relationships can also be imposed by law because of the relationship of the parties such as domanance by one and weakness by another, where one has gained the trust of another to handle their affairs, etc. In a 2018 case, the Court of Appeals held that a funeral home had a special relationship (fiduciary relationship) with the family concerning the handling of a body. In the case, the funeral home picked up, transported and displayed to the family the wrong body. 08-17-00151-CV.

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Are all Powers of Attorney the same?

Are all Powers of Attorney the same?

Are all Powers of Attorney the same?

The short answer is no.  A power of attorney can grant a general power or a special power.  It can be a durable power of attorney or not.  You can also have a power of attorney solely for medical decisions.

What do all of these terms mean?  A power of attorney is granted by one person, the principal, to another person, the agent usually called the “attorney in fact.”  The attorney in fact has the powers to act on behalf of the principal and to do those things that the principal has granted him the power to do just as if the principal were doing them himself.

A general power of attorney grants the broadest powers.  An attorney in fact with a general power of attorney, can do almost anything from selling the principal’s real estate to opening and closing bank accounts on behalf of the principal.

A special power of attorney is less broad and is restricted to the powers that are specifically mentioned in the special power of attorney.  An example would be granting someone the power to transfer title to an automobile or to cash a check from an insurance settlement.  The attorney in fact is not allowed to act on behalf of the principal except within the limits set out in the special power of attorney.

A power of attorney for medical purposes gives the attorney in fact the right to make medical decisions on behalf of the principal at a time when the principal is not capable of making them himself.

Any power of attorney can be made “durable.”  A power of attorney ends if the principal becomes incompetent.  A durable power of attorney will remain in effect even if the principal becomes incompetent.  From this discussion, you can see that the principal must be competent at the time he grants a power of attorney; otherwise, the power of attorney is no good.

A power of attorney ends on the death of the principal, whether the power of attorney is durable or not.

The attorney in fact must exercise his powers with the utmost care because he is a fiduciary and is potentially liable if he does not take good care of the principal’s property under his control.

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