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COURT: LAWYER INCOMPETENT FOR ADVISING CLIENT TO ACT BEYOND AUTHORITY UNDER POWER OF ATTORNEY

A court has ruled an attorney was incompetent for advising his client, who was acting as agent for his brother pursuant to a power of attorney, to transfer assets to himself notwithstanding a lack of authority. Most people think (apparently, including some attorneys) that a general durable financial power of attorney grants the agent the authority to do anything that the principal (the one who signed the document) could do. However, under Texas law, there are many “hot powers” (including the power to make transfers and self-dealing) that must be specifically stated in the power of attorney for there to be authority for the agent to take such actions.

LAWYER INCOMPETENT FOR ADVISING CLIENT 
TO ACT BEYOND AUTHORITY UNDER POWER OF ATTORNEY

In this case, the attorney advised the agent to transfer assets to himself so that his brother could be eligible for Medicaid (which is “means-tested”). However, such action is a breach of fiduciary duty since the action exceeded the authority granted by the power of attorney (there was no authority to make transfers). Furthermore, there was no authority for self-dealing. Finally, the transfer of the assets from the agent to himself could even be a criminal act for the financial exploitation of his incompetent brother.

As a result of the attorney’s failure to advise the agent of such ramifications, the court ruled the attorney was incompetent which lead to disciplinary action against the attorney.

It should be noted that most elder law attorneys (in contrast to most estate planning attorneys) often prepare various hot powers such as the right to make transfers, self-dealing provisions and the right to create trusts as such authority is often used to help the principal get eligible for public benefits – especially if the principal has inadequate income, assets or insurance to pay for long-term care.

If interested in learning more, consider attending our next free “Estate Planning Essentials” Workshop by calling us at (214) 720-0102 or signing up by clicking here

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