A durable power of attorney can give another person substantial authority over your financial affairs.

But exactly how much authority?

Many people assume that being named as an agent under a power of attorney means that the agent can essentially step into the principal’s shoes and do anything the principal could have done personally.

That is not necessarily true.

Under Texas law, the authority of an agent depends on the terms of the power of attorney, the powers granted by the principal, statutory limitations, and sometimes other documents governing the particular property or transaction.

Some powers can be granted relatively broadly. Other particularly significant powers—such as making gifts, changing beneficiary designations, or creating survivorship rights—require express authority.

And some things simply cannot be accomplished through a durable financial power of attorney.

Understanding these distinctions can be important both for people creating powers of attorney and for family members who later find themselves trying to use one.

What Is a Durable Power of Attorney?

A power of attorney is a legal instrument through which one person, called the principal, authorizes another person, called an agentor attorney-in-fact, to act on the principal’s behalf.

A durable power of attorney is particularly important because it can remain effective despite the principal’s later incapacity.

That does not mean that it continues forever.

As discussed in our earlier article concerning the different types of powers of attorney in Texas, a durable power of attorney can survive incapacity but terminates upon the principal’s death.

The purpose of a durable financial power of attorney is therefore generally to allow another person to handle the principal’s financial, property, and business affairs during the principal’s lifetime.

But the word “durable” describes when the authority can continue—not how extensive the authority is.

That is an important distinction.

The Document Itself Matters

The first question when determining whether an agent can perform a particular act should usually be:

What authority did the principal actually give the agent?

Texas Estates Code Chapters 751 and 752 govern statutory durable powers of attorney and the construction of the powers granted through them.

The Texas statutory durable power-of-attorney form allows a principal to grant authority over numerous categories of transactions, including:

• real property;
• tangible personal property;
• stocks and bonds;
• commodities and options;
• banks and other financial institutions;
• business operations;
• insurance and annuities;
• estates, trusts, and other beneficial interests;
• claims and litigation;
• personal and family maintenance;
• government benefits;
• retirement plans; and
• taxes.

A principal can grant some or all of these categories of authority and can also impose special instructions and limitations.

Accordingly, merely knowing that someone “has power of attorney” does not necessarily answer whether that person can perform a particular transaction.

You generally need to read the document.

Can an Agent Handle the Principal’s Bank Accounts?

Potentially, yes.

If the power of attorney grants appropriate authority concerning banking and financial transactions, an agent may be able to perform many ordinary financial activities for the principal.

Depending on the authority granted and the circumstances, this can include activities such as depositing and withdrawing funds, paying bills, dealing with financial institutions, and handling other banking matters.

This is one of the most common practical reasons for executing a durable power of attorney.

For example, an elderly parent who becomes unable to handle routine financial matters may need an adult child to pay utilities, manage accounts, or deal with financial institutions on the parent’s behalf.

But authority to manage the principal’s money does not mean that the agent now owns the money.

That distinction becomes particularly important when an agent attempts to transfer the principal’s assets to the agent personally.

Can an Agent Buy or Sell Real Estate?

A properly authorized agent can have substantial authority concerning real property.

Chapter 752 provides extensive powers relating to real-property transactions when that category of authority has been granted.

Depending on the document and transaction, an agent may be able to buy, sell, lease, manage, finance, mortgage, or otherwise deal with real property for the principal.

That can be enormously useful when the principal is incapacitated or simply unable to participate personally in a transaction.

But real estate also illustrates why the actual document matters.

A title company, lender, purchaser, or other party may carefully examine the power of attorney before accepting an agent’s signature. Other laws and property rights—particularly those involving homestead property—may also affect a proposed transaction.

Possessing a power of attorney therefore does not mean that an agent can automatically sign any imaginable real-estate document.

Can an Agent Operate the Principal’s Business?

Potentially.

Texas law permits a principal to confer authority relating to the operation of a business.

Depending on the authority granted, an agent may be able to participate in business decisions, deal with employees or contractors, execute documents, handle financial matters, and perform other acts necessary to continue the principal’s business affairs.

But again, the POA is not necessarily the only document that matters.

A company agreement, partnership agreement, corporate governing document, contract, or other instrument may independently restrict what can be done with a particular business interest.

The fact that an agent can act for the principal does not necessarily eliminate restrictions that already apply to the principal or the property.

Can an Agent Handle Lawsuits and Legal Claims?

A durable power of attorney can grant authority concerning claims and litigation.

That can allow an agent to take actions concerning claims belonging to the principal, including dealing with disputes and settlements.

It does not, however, transform a nonlawyer agent into an attorney licensed to practice law.

An agent may be authorized to act on the principal’s behalf concerning a legal claim while the actual representation of the principal in court remains subject to the laws governing the practice of law.

This distinction is particularly important because attorney-in-factdoes not mean attorney-at-law.

The two terms describe very different things.

Can an Agent File Taxes?

Yes, appropriate authority can be granted concerning tax matters.

Chapter 752 specifically recognizes tax matters as a category of authority under the statutory durable power of attorney.

Depending on the circumstances, an agent may be authorized to prepare, sign, file, and deal with matters concerning tax returns and taxing authorities.

However, a particular taxing authority may have its own procedural requirements or forms governing who it will recognize as authorized to act for a taxpayer.

Thus, the existence of a Texas durable power of attorney does not necessarily eliminate every separate administrative requirement imposed by the IRS or another governmental agency.

Some Powers Require Express Authority

This is where durable powers of attorney become particularly interesting.

Texas Estates Code § 751.031 distinguishes ordinary grants of authority from several especially consequential acts.

An agent may perform certain acts only if the durable power of attorney expressly grants that authority and the exercise of the authority is not otherwise prohibited by another applicable agreement or instrument.

These powers include authority to:

• create, amend, revoke, or terminate an inter vivos trust;
• make a gift;
• create or change rights of survivorship;
• create or change a beneficiary designation; and
• authorize another person to exercise authority granted under the power of attorney.

The statutory durable power-of-attorney form itself emphasizes the significance of these powers. It warns that granting them can substantially reduce the principal’s property or alter how the property will be distributed at death. (Texas Constitution and Statutes)

That warning exists for a good reason.

These are not merely administrative powers.

They can potentially change the principal’s estate plan.

Can an Agent Make Gifts?

Not merely because the agent possesses broad financial authority.

Making gifts is one of the powers for which Texas law requires express authority.

If gift authority is properly granted, Texas Estates Code § 751.032 further governs the extent of that authority.

The POA itself may also impose additional limitations.

This distinction prevents ordinary authority to manage property from automatically becoming authority to give that property away.

For example, an agent authorized to manage a $100,000 bank account does not necessarily have authority to withdraw $50,000 and give it to the principal’s child.

And the problem becomes even more obvious if the agent proposes:

“I am the principal’s agent, so I have decided that the principal would like to give $50,000 to me.”

That is not simply an ordinary banking transaction.

Can an Agent Give the Principal’s Property to Himself?

This is one of the most important limitations to understand.

Texas law imposes restrictions on an agent’s ability to use specifically granted powers to create an interest in the principal’s property for the agent personally or for certain persons whom the agent is legally obligated to support.

Section 751.031 contains particular rules concerning agents who are not the principal’s spouse, ancestor, or descendant, subject to contrary provisions in the power of attorney.

And independent of those statutory limitations, an agent under a durable power of attorney owes duties to the principal.

The basic principle is simple:

Authority to control someone else’s property is not the same thing as ownership of that property.

An agent cannot simply treat the principal’s assets as a personal checking account.

Can an Agent Change Beneficiaries?

Only if the necessary express authority has been granted.

Changing a beneficiary designation can dramatically affect what happens to property at death.

Consider a principal who has designated three children equally as beneficiaries of a financial account.

If an agent could use ordinary account-management authority to remove two children and designate the agent as the sole beneficiary, routine financial authority would effectively become the power to rewrite the principal’s estate plan.

Texas law therefore treats the creation or alteration of beneficiary designations as a special power requiring express authority. (Texas Constitution and Statutes)

The same general concern explains the special treatment of survivorship rights.

Can an Agent Create or Change a Trust?

Again, only with the required express authority.

Section 751.031 specifically addresses authority to create, amend, revoke, or terminate an inter vivos trust.

Trust transactions can substantially alter ownership, management, and ultimate distribution of the principal’s property.

Accordingly, general language giving an agent broad financial authority should not automatically be assumed to authorize fundamental changes to the principal’s trust arrangements.

The actual POA and applicable trust documents must be examined.

Can an Agent Change the Principal’s Will?

A durable power of attorney should not be viewed as authority to make a will for the principal.

A will is the principal’s testamentary act.

The ability to manage another person’s property during life does not turn the agent into a substitute testator who can simply rewrite where the principal’s probate estate will go at death.

This produces an interesting distinction.

An agent with properly granted special authority may potentially take certain actions during the principal’s lifetime that affect the principal’s eventual estate—such as changing a beneficiary designation or creating survivorship rights.

But that is not the same thing as executing a new will on behalf of the principal.

Can a Financial Agent Make Medical Decisions?

Not merely because the person holds a durable financial power of attorney.

Texas treats financial powers of attorney and medical powers of attorney separately.

A medical power of attorney concerns healthcare decisions when the statutory requirements for exercising that authority are satisfied.

Our earlier POA article likewise distinguishes a durable financial POA from a medical POA, describing the former as dealing with financial and business matters and the latter as dealing with healthcare decisions.

Someone could certainly be named under both documents.

But authority under one should not simply be assumed to create authority under the other.

An Agent Is a Fiduciary

Perhaps the biggest misconception about a power of attorney is that it constitutes a transfer of ownership.

It does not.

An agent acts for the principal.

Texas Estates Code Chapter 751 imposes duties on agents, and the agent’s authority must be exercised consistently with those obligations.

The existence of broad transactional authority therefore does not give an agent permission to exploit the principal, disregard the principal’s instructions, or use the principal’s property as though it belonged to the agent.

This becomes especially important when the principal is incapacitated and can no longer easily supervise what the agent is doing.

The very circumstances that make a durable power of attorney useful can also make abuse of that authority particularly dangerous.

Can the Principal Still Act After Giving Someone Power of Attorney?

Generally, granting another person power of attorney does not mean that a competent principal has surrendered the ability to manage the principal’s own affairs.

The agent receives authority to act on behalf of the principal.

The principal does not ordinarily cease being the owner of the property or lose personal decision-making authority merely because an agent has also been authorized to act.

This is another reason the phrase “power of attorney”can create confusion.

The principal has delegated authority—not transferred his or her identity to somebody else.

Can an Agent Delegate the Power of Attorney to Someone Else?

Not automatically.

The authority to authorize another person to exercise powers granted under the POA is itself among the special powers identified in § 751.031.

The statutory form therefore permits the principal specifically to decide whether the agent should have that authority. (Texas Constitution and Statutes)

An agent generally cannot assume:

“Mom trusted me, and I trust Bob, so Bob now has Mom’s power of attorney.”

The principal—not the agent—decides the scope of the agent’s authority.

What Happens When the Principal Dies?

The agent’s authority ends.

This point is important enough to repeat because it is one of the most persistent misconceptions surrounding powers of attorney.

A durable power of attorney is durable against incapacity.

It is not durable against death.

Your earlier article emphasizes precisely this rule: upon the principal’s death, authority over estate matters shifts away from the POA agent and to the appropriate executor or administrator under probate law.

Accordingly, an agent should not continue writing checks, selling property, or otherwise conducting transactions under the supposed authority of the POA after learning that the principal has died.

Any subsequent authority must arise from some other legal capacity.

The Most Important Question Is Usually: What Does the POA Actually Say?

A durable power of attorney can be extraordinarily broad.

But the phrase “I have power of attorney” does not answer every question.

The better questions are:

What powers did the principal grant?

Did this particular act require express authority?

Did the principal place limitations on that authority?

Does another contract, account agreement, trust instrument, statute, or other law restrict the proposed transaction?

Is the agent acting for the principal’s benefit and consistently with the agent’s legal duties?

And finally:

Is the power of attorney still in effect?

Those questions can produce very different answers depending upon the document and circumstances.

A durable power of attorney is not a legal permission slip to “do whatever the principal could do.”

It is a delegation of particular authority from one person to another, governed by the language of the instrument and Texas law.

For principals, that makes careful drafting important.

For agents, it makes careful reading equally important.

And when a proposed transaction involves gifts, trusts, survivorship rights, beneficiary designations, self-dealing, or other actions that could fundamentally change ownership or the principal’s estate plan, simply knowing that someone “has POA” is only the beginning of the analysis.

At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.