Buying or selling a business

Sam Moak

Editor's Note: The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.

In past columns I have discussed the importance of having a Last Will and Testament. A Will is important because it allows you to direct the distribution of your assets and enables you to name a guardian for your children. However, a Will does not take effect until you are no longer alive. What if you are still alive but unable to make your own decisions because of an incapacitating illness or injury? 

In September 2017, the State of Texas updated its recommended legal instruments for someone who may become incapacitated or may not be able to take action. To provide for these situations there are now five legal instruments everyone should have. Formerly, there were only three. These instruments are a Statutory Durable Power of Attorney, a Medical Power of Attorney (sometimes called a Power of Attorney for Healthcare), a Declaration of Guardian, a Directive to Physicians (or Living Will) and Disposition of Remains document. 

The Statutory Durable Power of Attorney. This instrument grants authority to a designated agent to manage the principal’s property on his or her behalf. The powers given the agent should be based on complete trust and the agent must be selected carefully. The State of Texas has established a particular minimum suggested form for this instrument so that decisions concerning the management of property can be made without trouble. However, the principal can chose to grant an agent one or more specific powers through a Specific Power of Attorney. If the principal chooses to grant the agent the power to perform every act the principal could perform, if personally present, then it is called a durable power of attorney. An important part of the durable power of attorney is the section that denotes whether the agent is to be reimbursed for expenses paid on the principal’s behalf and whether the agent is to be compensated for performing his/her role. Generally, an agent is prohibited from making gifts, so the ability to make gifts must be addressed as well. In addition, the principal can elect to have the durable power of attorney become effective immediately upon signing it or only upon the principal’s future disability or incapacity.

The second type of power of attorney is the Medical Power of Attorney, sometimes called a Power of Attorney for Health Care. This instrument grants the agent the power to make health care decisions for the principal if the principal is unable to make them. Again, the agent must be selected carefully, based on complete trust. The agent may exercise his or her authority only if the principal’s attending

Physician certifies that, in the physician’s opinion, the principal lacks the capacity to make health care decisions. The principal can revoke the medical power of attorney at any time, regardless of the principal’s mental state. The Power of Attorney for Health Care must be signed by two witnesses, neither of whom are:

1. the person designated as agent;

2. the principal’s health or residential care provider or an employee of a health or residential care provider;

3. the principal’s spouse;

4. the principal’s lawful heirs or beneficiaries named in his or her Will or a deed; or

5. creditors or persons who have a claim against the principal.

Another document usually considered along with the power of attorney is a Directive to Physicians and Family (or Living Will). If you desire that your life not be artificially prolonged in the event of a terminal condition, you should consider signing a Living Will. You should consult with an attorney and your physician to understand the full impact of the Living Will.

A Declaration of Guardian is an instrument allows you to select who you would want to manage your financial affairs and personal affairs if a court of law determines you are a danger to yourself and your property. This instrument is beneficial in the event you are suffering from an illness (i.e., dementia) that prevents you from realizing your actions are dangerous to you and your estate/property. You cannot have your right to make decisions taken away without a court of law, but this instrument, if signed when you are of sound mind, lets you pick who would be able to make your decisions with regard to personal and estate/property matters if you had your right taken away.

Finally, a disposition of remains instrument is valid after your death. It serves to communicate who you put in charge of the disposition of your remains (i.e., selecting and releasing your body to a funeral home, funeral arrangements). This section is very important if there is a possibility family members may not agree on funeral matters. This can be a common problem in second marriages where the children and second spouse may not agree.

As I mentioned earlier, in Texas the form for a Durable Power of Attorney is prescribed by statute. However, there are many versions of these instruments out there and all of them may not be valid in Texas. Each of the above instruments must be properly executed, witnessed and notarized as prescribed by statute. Therefore, you should consult an attorney if you are considering having any of these documents prepared.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.