The Fiduciary Obligations of a Holder of a Power of Attorney Under Texas Law
A power of attorney (POA) is a legal instrument that grants authority to a person (the agent) to act on behalf of another person (the principal). In Texas, the holder of a POA owes a fiduciary duty to the principal, which is a legal obligation to act in the principal's best interest, with the utmost loyalty and good faith. This fiduciary duty imposes various obligations on the holder of a POA, which are discussed below.
Duty to Act in Good Faith and with Loyalty
The holder of a POA has a duty to act in good faith and with loyalty to the principal. This means that the holder must act honestly and with the principal's best interests in mind. The holder cannot use the POA to benefit themselves or others at the expense of the principal or take advantage of the principal's position of trust and confidence. The holder must also avoid conflicts of interest and disclose any conflicts that arise.
Duty to Exercise Care and Prudence
The holder of a POA has a duty to exercise care and prudence when carrying out their duties. This means that the holder must use reasonable skill and care in managing the principal's affairs and make decisions that are in the best interests of the principal. The holder must also avoid acting recklessly or negligently and take steps to protect the principal's assets from loss or damage.
Duty to Keep Accurate Records
The holder of a POA has a duty to keep accurate records of all transactions and activities carried out under the POA. This means that the holder must keep detailed records of all financial transactions, including receipts, invoices, and bank statements. The holder must also keep a record of all decisions made and actions taken on behalf of the principal and provide regular reports to the principal on the status of their affairs.
Duty to Avoid Self-Dealing
The holder of a POA has a duty to avoid self-dealing, which means that the holder cannot use the POA to benefit themselves or others at the expense of the principal. The holder cannot engage in transactions that are not in the best interests of the principal or that would result in a conflict of interest. The holder must also disclose any conflicts of interest that arise and obtain the principal's informed consent before engaging in any self-dealing.
Duty to Maintain Confidentiality
The holder of a POA has a duty to maintain confidentiality, which means that the holder must keep all information related to the principal's affairs confidential unless disclosure is required by law or authorized by the principal. The holder cannot use or disclose any confidential information for their benefit or the benefit of others.
Duty to Act Within the Scope of Authority
The holder of a POA has a duty to act within the scope of their authority, which means that the holder cannot exceed the powers granted to them under the POA. The holder must also act in accordance with any limitations or restrictions imposed by the POA and not engage in any activities that are outside the scope of their authority.
Duty to Act in the Principal's Best Interests
The holder of a POA has a duty to act in the principal's best interests, which means that the holder must make decisions and take actions that are in the best interests of the principal. The holder must consider the principal's wishes, values, and goals and act in a manner that is consistent with the principal's best interests.
Remedies for Breach of Fiduciary Duty
If the holder of a POA breaches their fiduciary duty, the principal or their legal representative may bring a legal action to seek damages or other remedies.