What You Need to Know About Attorney in Fact
If you have been asked to serve as someone’s attorney-in-fact, before accepting the responsibility to act, you should be aware of your responsibilities and duties to that individual.
Generally, an attorney-in-fact is a relative or trusted associate with whom the principal, or person who appoints such individual, is relying on to make sound and responsible decisions in the principal’s best interests. In essence, you are acting as the principal’s agent and have a fiduciary obligation to represent the principal with utmost regard to his or her financial affairs.
What is an Attorney-in-Fact?
An attorney-in-fact does not have to be an attorney or even an individual. There are organizations or financial institutions that may serve in that capacity. If you are appointed, your authority may be a general one or be very specific where only limited transactions may be conducted by you. If a general power-of-attorney is given to you, then your duties may consist of:
- – Opening and closing bank accounts
- – Depositing and withdrawing funds from accounts
- – Trading stocks
- – Cashing checks
- – Paying bills
- – Signing contracts or leases
The principal who gave you this power does not necessarily have to be incapacitated. In many cases, the principal may be out of the country or otherwise unavailable to conduct certain business activities. If this is the case, then your actions are in tandem with the principal who may be relying on your judgment and knowledge to take care of particular matters for hjim/her. Be aware that you have a fiduciary responsibility to the principal to act reasonably, ethically, and in the principal’s best interest. His or her goals and wishes must be kept in mind when making certain decisions that affect the principal’s assets. You may not have total control over the principal’s assets or finances, you may share it with the principal if the principal has legal mental capacity.
Types of Attorney-in-Fact
As indicated above, there are two types of attorney-in-fact: general and specific. If appointed with general powers, then your duties consist of those cited above. If specific, then your power or authority is limited to certain acts specified within the document appointing you. For instance, you may only have the duty as attorney-in-fact to sign specific documents such as a sale and purchase agreement, settlement agreement, to sign certain checks, or to conduct certain transactions. An elder law lawyer may be the one drawing up a power-of-attorney document that specifies what limited transactions you may engage in.
In most cases these days, the document that appoints an individual as an attorney-in-fact is called a “durable power-of-attorney.” When you are appointed as the attorney-in-fact in a “durable power-of-attorney”, your authority may go into immediate effect or it may be delayed until the principal has lost the legal mental capacity to make financial deicisions. This latter circumstance is referred to as a “springing” power-of-attorney whereby your authority becomes effective when the principal is deemed incapable or incapacitated to conduct his or her affairs. The document may indicate when this occurs, such as having one or two physicians certifying that the principal is indeed incapacitated. However, in most cases you will already have been designated as the attorney-in-fact for the principal but the principal does not intend for you to act as such until the principal becomes incapacitated or some other specific event occurs.
A general power-of-attorney terminates when the principal becomes incapacitated, however, in a “durable power-of-attorney” document the attorney-in-fact’s ability to act for the principal survives through the principals’ incapacitated mental condition.
Liability of an Attorney-in-Fact
As an attorney-in-fact, you have a fiduciary responsibility to the principal, which means that you have a very high duty of care and must act with the principal’s best interests in mind. In other words, there must be no conflict of interest in whatever transactions or decisions you are making as the principal’s agent. If you personally profit from a transaction, then your actions may come under intense scrutiny, even if the principal profited as well, unless the principal had knowledge and explicitly consented to it in writing. For every attorney-in-fact, your overriding duty is one of undivided loyalty to the principal.
Most cases of breach of fiduciary duty matters involve fraud, self-dealing, misrepresentation, and concealment of a conflict of interest or material facts that damaged the principal. However, there is no requirement that a fiduciary or attorney-in-fact have benefited from a transaction to constitute a breach of fiduciary duty; only that the fiduciary or attorney-in-fact failed to act in good faith with regard to the principal’s interests and that the principal suffered damages as a result.
Finally, as attorney-in-fact, it is your responsibility to maintain meticulous records of your actions and the transactions in which you participated. Be careful to not commingle the funds you are managing with your own.
If you wish to be compensated for your work, the principal must consent to it in writing. If so, then your compensation must be reasonable and your rate of pay put in writing. Keep accurate and meticulous records of the actions for which you are being compensated.
Terminating the Power-of-Attorney
The principal may terminate you or revoke your power-of-attorney at any time with no reason required after sending you written confirmation. If a conservator has been appointed for the principal, then that individual may revoke your power as well. If the power-of-attorney is not a durable one, then your agency relationship terminates when the principal becomes incapacitated. Otherwise, it endures or is preserved when such an event does occur.
Consult Elder Law Lawyer Patricia Bloom-McDonald
If you have questions about your responsibilities as an attorney-in-fact or wish to appoint someone, call the Law Offices of Patricia Bloom-McDonald. She is an elder law and estate planning lawyer who can discuss your particular duties or what particular responsibilities you would like to have an attorney-in-fact perform on your behalf.
Attorney Bloom-McDonald concentrates her law practice in all matters and issues affecting the elderly. Call her today for a consultation.