The Texas legislature made numerous changes to state laws in the estate planning area including to statutory provisions that govern wills, trusts, probate, and financial powers of attorney. One substantive change to the Durable Power of Attorney Act limits the scope of the fiduciary duties owed by the appointed agent to his principal (person granting the power) under a financial power of attorney.
Unquestionably, when exercising powers granted by a POA, the agent owes fiduciary duties to his principal. However, as discussed in a previous blog article, some Texas courts held that the agent owed general fiduciary duties to the principal in transactions unrelated to the POA,
For example, if the agent signs a contract on behalf the principal under the authority of the POA, then the agent clearly owes fiduciary duties to the principal in exercising this power. On the other hand, if the principal signs documents for the benefit of his agent, such as making his agent a beneficiary of the principal’s bank account, this would not involve the exercise of a power by the agent under the POA.
Even so, some courts indicated that the relationship created by the POA meant the agent owed general fiduciary duties to the POA applying anytime the principal bestowed these types of benefits upon the agent. Thus, the agent could be sued for breach of fiduciary duty by accepting financial benefits or gifts from the principal.
To alleviate this, the following section of the Durable Power of Attorney Act has been amended, effective Sept. 1, 2017, as follows:
“Sec. 751.101. FIDUCIARY DUTIES.
A person who accepts appointment as an agent under a durable power of attorney as provided by Section 751.022 is a fiduciary as to the principal only when acting as an agent under the power of attorney and has a duty to inform and to account for actions taken under the power of attorney.” (emphasis added).
Thus, although one should think long and hard before agreeing to act as another’s agent under a financial power of attorney, this provision at least limits the scope of the fiduciary duties created by the power of attorney.