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Copyright 2008 The Dallas Morning News

 Distributed by McClatchy-Tribune Business News

 May 12, 2008 Monday

SECTION: BUSINESS AND FINANCIAL NEWS

ACC-NO: 20080512-DA-Be-picky-to-make-sure-power-of-attorney-is-honored-0512

LENGTH: 905 words

BYLINE: Pamela Yip, The Dallas Morning News

BODY: 

May 12--The durable power of attorney is a critical component of estate planning.

But it could run into roadblocks if you don't craft it correctly.

Many financial-services companies and other businesses are skittish about complying with a power of attorney unless they're certain the document is genuine and the person claiming to have that authority isn't acting fraudulently.

"What used to be a constant in incompetency planning has become unreliable and inconsistent in its application," said Charles Sharpe, an estate-planning attorney in Dallas.

The power of attorney isn't to be conferred lightly because it gives a person the authority to handle your financial affairs if you become incapacitated.

"It should be someone you trust with every penny you have in the world, because that's what they have access to," said B. Scott Daugherty, assistant general counsel at the Texas Bankers Association.

Contrary to what many may believe, being married doesn't automatically give your spouse such authority.

A few years ago, the Texas Legislature approved legislation to standardize the document and make it easier for Texans to exercise this legal procedure.

Even so, problems still occur.

"Someone holding a power of attorney is supposed to be able to take it to the various financial institutions -- banks, brokerage houses, mortgage and title companies and the like -- to execute transactions for the person they represent," said Ed Fjordbak, a lawyer and senior vice president of wealth management and trust at Texas Capital Bank in Dallas. "But some are surprised to find that not all financial institutions will honor the document."

And that can catch families off guard.

"You don't necessarily know it's a problem until it's too late to fix it because you don't generally act on a power of attorney unless you need to, and when you need to, you can't," Mr. Sharpe said.

His clients Sandy and Gary Mayfield of Denton ran into problems when they were buying their home last year while Mr. Mayfield was on an overseas assignment.

Mrs. Mayfield said they had to revise their power of attorney four times. And, on the day the deal closed, the title company required Mr. Mayfield to call from his international location to verify that he was alive and that he gave his wife power of attorney to handle the transaction.

"It was crazy," Mrs. Mayfield said. "I have never gone through such a hassle in my life. What good does this piece of paper do if they're not going to honor it?"

The house purchase was eventually completed.

Experts say there are several reasons why banks and other businesses may be reluctant to honor a power of attorney:

-- The financial institution may not be familiar with the person given power of attorney and may be worried about fraud.

-- The institution may be concerned that the power of attorney has been revoked.

"If you change it or revoke it, you need to tell us, otherwise we will assume this is good until you tell us," Mr. Daugherty said.

-- There's a risk that the person given power of attorney may exceed his or her authority.

"If you don't know that customer very well or at all, and you certainly don't know that agent [the person holding power of attorney] very well, what kind of issues are going to pop up in your mind?" said Debbie Cox, a wealth adviser at J.P. Morgan Private Bank in Dallas.

If you're considering a power of attorney, get to know the people at the companies you do business with and introduce them to your named representative.

Give them original copies of the power of attorney for their files.

Some banks may require you to fill out their own power of attorney form.

To assuage third parties' fears of getting sued, the Texas Statutory Power of Attorney indemnifies them for any claims that may arise from their honoring the document.

To ensure that you get it right, consult a lawyer to craft your power of attorney, and don't let it get stale. Update it at least every two years to ensure that it still reflects your wishes.

"You don't want someone to go into a bank with a power of attorney that's 15 years old," said John Ventura, a lawyer and director of the Texas Consumer Complaint Center at the University of Houston. "That's going to cause all kinds of problems."

Be very specific as to when you want the power of attorney to take effect.

"You need to ask yourself, 'What condition do I need to be in in order for the power of attorney and attorney-in-fact [the person acting on your behalf] to start acting for me?'" Mr. Ventura said.

Use precise language to give your representative the authority he or she needs to act on your behalf but back that up with broad general authority.

"If you put limitations on the power of attorney, that makes banks nervous because they're afraid of going beyond the limitations of the power of attorney," Mr. Ventura said.

Do all this while you're still healthy and of sound mind.

"Anytime there's an incapacity involved, it's awfully difficult on everybody," said Ms. Cox. "It's not the time for the power of attorney to be tested."

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LOAD-DATE: May 12, 2008