What you need to know about Attorney in-fact Responsibilities
Being asked to be and then appointed as an attorney-in-fact should be considered an honor. Generally, a parent or other family member might have asked you but a close business associate or longtime friend might have appointed you as well. This connotes a measure of trust and confidence in you that you need to take seriously and to fully understand your responsibilities.
An attorney-in-fact means that you have been appointed under durable power of attorney to represent the principal or individual who appointed you. As such, you have the power or right to do whatever the principal would do regarding his financial affairs. Your power to act comes or springs into effect either immediately when the document is signed, witnessed and acknowledged or upon the happening of an event such as the principal becoming incapacitated or incompetent. His or her incapacity has to be declared by at least one physician although the principal could require the opinions of two doctors of a particular specialty. To be durable or valid, the document appointing you must state that the power of attorney shall remain in effect regardless if the principal becomes incompetent.
Powers of an Attorney in Fact
Depending on whatever limitations or restrictions in the power of attorney document, you may be able to do the following:
- – Open bank accounts
- – Withdraw and deposit funds in bank accounts
- – Trade stocks
- – Pay obligations
- – Cash checks
- – Make investments
- – Buy and sell real property
- – file bankruptcy on behalf of the principal
- – act as the Guardian and/or Conservator
- – more powers may be articulated in the document
If the principal is still competent, you must take your instructions from him or her. In this situation, you do not have control over the property and assets of the principal but you do have access to the funds.
The Fiduciary Duty of an Attorney in Fact
As attorney-in-fact, you have a very high duty of care, good faith and fair dealing. Your actions must be consistent with the best interests, goals and intentions of the principal. You may have discretion in your dealings with the principal’s property but your judgment will be scrutinized to ensure you used due diligence if necessary and your decisions are in harmony with and in the best interests of the principal.
Not all business decisions work out, but that is not a basis for someone to assert that you violated your fiduciary duty. Your actions will usually be judged by whether they were grossly negligent or criminal or you acted with gross misconduct. This would include embezzlement, selling property at less than market value to friends or having business associates charge exorbitant fees or expenses against the estate for services that could have been performed at much lower rates.
Working with Multiple Attorneys in Fact
There is no prohibition on appointing more than one attorney-in-fact. The principal may have one individual handle certain investments while another takes care of certain business affairs. If the duties conflict, there must be communication with the other to ensure that the wishes and intentions of the principal are being followed in how a transaction should be handled. If there is no consensus on how to handle a particular business affair where both attorneys-in-fact are involved, the document may have a provision on how to resolve a conflict. Absent that, you may have to petition the probate court to determine which action conforms to the principal’s intent or best interests.
To justify your actions and to avoid liability, you should document all your transactions and decisions. Avoid at all costs comingling the principal’s or estate’s funds with your own and be sure there is a separate bank account though which all funds from sales or generated income are deposited.
If family members are disagreeing with your judgment or decision, you may have to ask the court to decide the issue for you. This is expensive, of course, and will delay the ultimate decision, which could be counterproductive or harmful to the estate.
You may also want to discourage the principal from giving you a gift. You may have to prove that the gift was not a product of undue influence and was intended solely as gratitude for your service.
Patricia Bloom-McDonald is an elder attorney and estates and trusts lawyer with offices in Westport and Canton. With over 25 years of experience in estate and trusts law, she can counsel you on your responsibilities as an attorney-in-fact and ensure you are adhering to your fiduciary responsibilities. If you have any questions or concerns about issues concerning an attorney-in-fact, contact her office today.