Printing and Signing Your Own Power of Attorney May Not Be Enough to Make it Effective. Here's Why.

Texas Estate Planning Attorney
Abilene, Texas Power of Attorney

I practice law in Abilene, Texas. In our state, citizens have the ability to sign a statutory power of attorney. The statutory power of attorney is a form that was created by the state legislature. Its purpose is to standardize the language that is available in a way that can save most people a lot of time and money that might otherwise be spent paying an attorney to create the document from scratch.

Because of the availability of the statutory power of attorney, many people now access a copy of it from the internet and execute it at home. This may work out well for any number of purposes, but - unfortunately - other aspects of Texas law have complicated a situation that was originally created to make things easier.

The Texas Constitution includes a provision which states that a home equity loan or reverse mortgage can only be closed "at the office of a lender, an attorney at law, or a title company." Tex. Const. sec. 50(a)(6)(N). This provision was created to protect Texas citizens from predatory lenders and swindlers. The classic example is a door-to-door salesman who shows up on the doorstep of an elderly widow with early signs of dementia and convinces her to immediately sign the paperwork needed to borrow a substantial amount of money to pay for services that she doesn't need. The idea is that, if we require the lender to utilize an office, or if the document is executed at a title company, there is less risk that she will be swindled. Additionally, the constitution allows for the execution of the lending documents at an attorneys' office, which is a more "traditional" way of entering into a power of attorney.

So far, so good. I think most of us would agree that it is a good idea to provide some protections for vulnerable people, such as the widow that I described in the previous paragraph. But...

In 2013, the Texas Supreme Court held that, when someone holding a power of attorney is attempting to secure an equity loan or reverse mortgage, the Constitution also requires that the document creating a power of attorney to be executed at the office of a lender, a title company, or an attorney. Finance Commission of Texas v. Norwood, 418 S.W.3d 566 (Tex. 2013). The practical effect of this decision is that, even if you have executed your power of attorney properly, using the proper form, the person who holds your power of attorney may not be able to borrow money on your behalf if you executed the document at home.

Now, this problem doesn't prevent the power of attorney from being used for other purposes, such as banking and consumer transactions, or changing the title to things like automobiles and trailers. It doesn't even prevent them from taking out a loan that is not secured by a home. The power of attorney should still be effective for those types of things, but it is not uncommon for someone holding a power of attorney to need to use the equity in a home to borrow money for emergency expenses, and executing the power of attorney at home makes it impossible to do so.

The bottom line is that - to make sure your power of attorney is fully effective - you need to be physically present in an attorneys' office when you sign it. Not only is this necessary for your peace of mind, but it might actually be of practical significance in the future should the person holding your power of attorney need to borrow money on your behalf. Most attorneys will not charge an exorbitant fee to prepare a statutory power of attorney, and they can also usually help you with other estate planning issues that you may need.

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