Estate Planning

FAQs About Powers of Attorney and Directives

Is an Agent Named in a Durable Power of Attorney Legally Responsible for the Debts of a Principal?

by Rania Combs

An agent named in a durable power of attorney is generally not responsible for the debt of the principal unless they are a party to the debt or have acted outside the scope of their authority.

A Texas Durable Power of Attorney is a powerful document that allows you to grant an agent the power to handle a principal’s financial affairs during the your life. Choosing someone you trust is paramount; however, many people named as agents worry that serving as an agent could expose them to liabilities of the principal, or the person signing the power of attorney.

Still Life Of Power Of Attorney Document On Desk

Why Should You Sign a Durable Power of Attorney?

The benefit of signing a durable power of attorney is that it can eliminate the need for a court-appointed guardian if you become incapacitated. Durable Powers of Attorney contain provisions permitting the agent to to things such as manage bank accounts, pay bills, make investments, conduct real estate transactions, and pay your taxes. Without a power of attorney, it may be necessary to initiate a guardianship proceeding to authorize someone to act on your behalf.

However, simply being named as agent under a power of attorney will not make an agent legally responsible for your debt.

Duties of an Agent

An agent has significant powers. Because of that, the law imposes on them the duty to put the principal’s interest ahead of their own. This so called fiduciary duty means that they must act in the principal’s best interest.

When an agent accepts the responsibility granted under the Power of Attorney, he is acting as a fiduciary. The fiduciary relationship requires that the agent avoid conflicts of interest and act in good faith, in the principal’s best interest, within the parameters of the powers granted in the Power of Attorney.

Is an Agent Legally Responsible for a Principal’s Debt?

Generally, as long as the named agent is not a party to the debt, has acted responsibly and within the parameters of the powers granted in the Power of Attorney, and has signed documents in their capacity as agent, the agent will not be personally responsible for the debt of the principal.

To avoid personal responsibility, agents should always disclose that they are acting for the principal. For example, when agents sign legal documents, they should not simply sign their name. Rather, they should disclose their identity as an agent by printing the name of the principal and signing their name “as agent.”

This article was originally published on February 26, 2014, and updated on July 28, 2023.

About Rania

Rania graduated magna cum laude from South Texas College of Law Houston and is the founder of Rania Combs Law, PLLC. She has been licensed to practice law since 1994 and enjoys helping clients in Texas and North Carolina create estate plans that give them peace of mind.

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