Because you are dealing with Martina’s money and property, it is your duty to make decisions that are best for her. This means you must ignore your own interests and needs and the interests and needs of other people.
To help act in Martina’s best interest, follow these guidelines:
- Read the power of attorney and do what it says. Your authority is strictly limited to what the document and Texas law allow. Follow Martina’s directions in the document, even if you have the best intentions in doing something different.
- Understand when the power of attorney becomes effective. It may be right away or only when Martina can no longer make her own decisions.
If it is effective only when Martina can no longer make her own decisions, check to see if the document says how you will know when Martina can no longer make her own decisions. If the document does not provide that information, Texas law says that Martina will be considered incapable of making decisions if, because of a physical or mental condition, she cannot
» (a) provide food, clothing, or shelter for herself;
» (b) care for her own physical health; or
» (c) manage her own financial affairs.
If you need to show that Martina is incapacitated, you should talk to an attorney who can assist you in proving Martina’s incapacity.
- As much as possible, involve Martina in decisions. Many things can affect your decisions. For example, you might feel pressure from others. Martina’s abilities to make decisions might change from time to time. But remember, as Martina’s agent, you need to make decisions that are in Martina’s best interest. In many cases, you can act in Martina’s best interest by making the decision Martina would have made.
Even after it is clear that you must make decisions for Martina, ask her what she wants if she can communicate. If she can’t say what she wants, try to find out what she would have wanted. Look at any past decisions, actions, and statements. Ask people who care about Martina what they think she would have wanted. Make the decisions you think Martina would have wanted, unless doing so would harm her. Put her well-being above saving money for others who may inherit her money and property. Make sure she is safe and comfortable, and that her needs are met.
- Avoid conflicts of interest. Conflicts of interest come in several forms. A conflict of interest exists, for example, if you make a decision about Martina’s property that may benefit you or someone else at Martina’s expense. If you benefit from a decision involving Martina’s money or property and someone complains about the decision in a lawsuit, you will be required to prove that your decision was fair and reasonable. Under Texas law, all transactions between you and Martina are fraudulent and voidable unless you can show fairness and reasonableness.
As a fiduciary, you have a strict duty to avoid conflicts of interest—or even the appearance of a conflict of interest. If a situation comes up where you feel you cannot act in Martina’s best interest or there is an appearance that you are not acting in Martina’s best interest, you should tell the successor agent named in Martina’s power of attorney that you resign from acting as Martina’s agent. If Martina did not name a successor agent, contact an attorney for help on this issue.
- Be extremely careful about borrowing, loaning, or giving Martina’s money to yourself (including anlybody your are required to support) or others. Texas law allows Martina to decide if you may make gifts to yourself or others. You do not have the power to make gifts unless Martina gave you that power in her power of attorney and you know that the gift is consistent with what Martina wants. If Martina gave you that power, although Martina’s power of attorney could give you more or less power, your gifts to an individual often cannot exceed the amount of annual exclusion allowed from the federal gift tax for the year of the gift (for 2017, $14,000). Similarly, you may not give yourself or anybody you are required to support an interest in Martina's property unless Martina gave you the poer to do that in her power of attorney. You must check her power of attorney to see whether and to what extent Martina gave you the power to make gifts, and you should ask an attorney before you do something that might result in you or somebody you are required to support getting Martina's property.
Also talk to an attorney if you think Martina's power of attorney gives you the power to make changes to her estate plan, beneficiary designations, or survivorship accounts before you make any of those changes. Remember, you may be liable for a decision you made for Martina if you did not have authority to make that decision.
Even if Martina gave you the power to make gifts, you should be very careful if you use that power, and you should consult an attorney before making a gift. Also, it is good practice to make sure that any gifts you make on Martina’s behalf do not increase or complicate Martina’s taxes or change her plans to give away her property when she dies. Another good practice is to make sure that any gifts or loans you make on Martina’s behalf are in line with what Martina would have wanted. For example, if Martina gave money every year to a charity, the power of attorney may allow you to continue doing that.
- Avoid changing Martina’s plans for giving away her money or property when she dies. There may be rare situations when changing Martina’s plans is in her best interest. But you should get legal advice to make sure that the power of attorney and Texas law allow you to make such a change.
- Be very careful if you pay yourself for the time you spend acting as Martina’s agent. If Martina created her power of attorney on or after September 1, 2017, the form includes an option for her to choose whether she wants you to receive compensation that is reasonable under the circumstances of serving as her agent. If she does not make a choice, the law allows you to recive reasonable compentation. As a best practice for powers of attorney created at any time, you probably should not pay yourself for the time you spend acting as Martina’s agent unless Martina’s power of attorney specifically includes a provision allowing for your compensation.
If you decide to pay yourself for your work as Martina's agent, you need to show that your fee is reasonable. You should carefully document how much time you spend acting as Martina’s agent and what you did while acting as her agent. If you are worried about the reasonableness of your fee, talk to an attorney about it before you pay yourself using Martina’s money.
Texas law allows you to be reimbursed for money you spend performing the responsibilities specified by Martina’s power of attorney. It is also important to carefully document your expenditures by keeping receipts and descriptions of what you paid for and why you needed to pay for it.
Avoid possible conflicts of interest.
Sometimes people have good intentions but do things they shouldn’t. Because you are now a fiduciary, you should avoid any conflicts of interest. Here are a few examples of possible conflicts of interest:
Whose car is it?
You used Martina’s money to buy a car. You use the car to drive her to appointments, but most of the time you drive it just for your own needs. This may be a conflict of interest.
Should you do business with family?
Martina needs repair work in her apartment. You hire your son and pay him from Martina’s money. This may
be a conflict of interest, even though the work was needed. It appears that you have put your personal interest to benefit your son in conflict with Martina’s interests.
What is "reasonable" compensation?
The answer depends on the situation. A helpful guideline you might follow is that the amount you pay yourself should not exceed 5% of the money you receive or pay on Martina's behalf. For example, if you paid $200 for Martina's electrictity bill, you should make sure that the amount you pay yourself for acting as Martina's agent in apying that bill is not more than $10 ($10=$200*5%). You should think about whether it makes sense to pay yourself monthly for paying Martina's electircity bill if you only turned on automatic recurring payments. Always talk to an attorney if you are not sure about whether your compensation is "reasonable."