What is “Attorney-in-Fact”: Role, Rights, and Responsibilities

It’s not a new type of lawyer, nor a character from a John Grisham novel. An attorney-in-fact acts on behalf of another person, usually for business or personal reasons.

The role extends far beyond basic management tasks. It’s their legal duty to act in your best interest and play a crucial role in decision-making.

Below, we cover the key things to know around this critical aspect of legal representation and power delegation. We’ll shed light on the significance, scope of work, and responsibilities.

So, what is Attorney-in-Fact?

The definition of “Attorney-in-Fact” refers to an individual (“agent”), granted the legal authority in the place of another (“principal”) under a power of attorney arrangement. 

• Not to be confused with an attorney in law — a law school graduate who’s passed a bar exam — an attorney-in-fact doesn’t need legal qualifications. 
• The role comes with a considerable amount of authority and responsibility.
• Tasked with managing the principal’s financial, business, or personal affairs in an event the principal becomes incapacitated or can’t manage their affairs.
• Responsibilities are defined based on individual circumstances outline by the terms of the agreement, and can also be outlined in a will and testament. What is a will? If you don’t already have one, ready more to find out it’s importance.

Role of an Attorney-in-Fact  

Those appointed to act as an attorney-in-fact are granted the authority to make decisions on behalf of the principal.

These could include managing assets, entering into contracts, or even selecting healthcare providers. This authority however:

• Is not absolute.
• Has limitations – outlined in the power of attorney document.
• Is bound by fiduciary duties, a legal obligation to act for the benefit of the principal.
• Means they should manage the principal’s interests honestly, always putting the principal’s needs above their own.
• Acting in anything less than good faith or acting in self-interest can lead to legal consequences.

Types of Powers Granted to an Attorney-in-Fact

There are five powers of attorney types and each carries a unique set of characteristics and responsibilities.

• General powers
• Specific powers
• Limited powers
• Durable powers
• Springing powers

To create any type of arrangement, the principal must:

• Identify the agent clearly
• Describe their scope of authority in a carefully drafted document that adheres to specific legal requirements.
• Be very specific to avoid disputes. Any ambiguity should be clearly defined to prevent misunderstanding or complications.
• Collect valid signatures from all parties – often, a witness or notary signature is needed.
• Be mentally competent, at time of signing.

Understanding the powers of attorney in law is crucial. By distinguishing between broad, sweeping authority and specific, limited tasks, both the principal and agent can ensure their roles are clearly defined. Let’s delve into each in more detail…

General Power of Attorney 

A General POA is typically effective immediately upon execution and remains in effect until it is revoked by the principal or until the principal becomes incapacitated (unless it is a Durable Power of Attorney, which remains in effect even if the principal becomes incapacitated).

They’re granted for handling certain assets like:

• Financial transactions, legal dealings, personal affairs or business operations

Key Characteristics of General Power of Attorney:

• Broad Authority: grants the agent wide-ranging powers to act in almost any legal capacity on behalf of the principal.
• Immediate Effectiveness: becomes effective as soon as it is signed and remains in effect until it is revoked or the principal becomes incapacitated (unless it is specified as durable).
• Revocability: can be revoked at any time by the principal as long as they are mentally competent.

Considerations:

• Scope of Power: because a General POA grants broad powers, it’s important to choose a trusted individual as the agent.
• Duration: understanding that it typically does not remain in effect if the principal becomes incapacitated, unless specified as durable.
• State Laws: the form and powers of a General POA can vary by jurisdiction, so it’s important to ensure it complies with local laws.

Limited Power of Attorney

A Limited Power of Attorney (LPOA) is a legal document that grants an agent or attorney-in-fact the authority to act on behalf of the principal (the person granting the power) in specific matters or events, unlike a General Power of Attorney, which covers a broad range of actions. The scope and duration of the powers granted under a Limited Power of Attorney are clearly defined and restricted to particular activities or transactions. power of attorney rights and limitations

Limited power of attorney rights and limitations pertain to assets like:

• Specific financial transactions (banking or property), specific legal dealings, or specific business and personal affairs

Key Characteristics of Limited Power of Attorney:

• Narrow Scope: powers are strictly defined and limited to specific tasks, transactions, or time periods.
• Duration: It may be set for a limited time period or until the completion of a specified task.
• Revocability: Like other forms of POA, it can be revoked by the principal at any time, provided they are mentally competent.

Considerations:

• Precision in Drafting: clearly outline the specific powers granted to avoid any ambiguity or misuse.
• Choice of Agent: even though the LPOA is limited, choosing a trustworthy and competent agent is crucial so tasks are carried out as intended.
• Compliance with State Laws: ensuring the LPOA meets the legal requirements is essential for its validity.

Springing Power of Attorney 

A “springing” Power of Attorney (POA) is a specific type of power of attorney that becomes effective only under certain conditions, typically when the principal (the person granting the power) becomes incapacitated or unable to make decisions for themselves. This condition is often verified by a medical assessment.

They agent is granted to handle certain assets like:

• Financial transactions, legal dealings, or personal affairs. 

Key Characteristics of Springing Power of Attorney:

• Conditional Activation: it only becomes active under conditions specified in the document, such as the principal’s incapacity.
• Protection of Principal’s Interests: designed to ensure the principal retains control over their affairs until it’s absolutely necessary to hand over control.
• Flexibility and Control: the principal can specify what powers the agent has and can set the conditions under which those powers can be exercised.

Considerations & How to Activate a Springing Power of Attorney:

• Determining Incapacity: a clearly defined set of criteria in the POA document to prevent delays or disputes when activating the POA.
• State Laws: the legality and requirements for a springing POA can vary by jurisdiction, and when a springing POA becomes effective.
• Clarity and Specificity: The document should be clear and specific about the conditions triggering its activation and the extent of powers granted.

Although this arrangement has obvious benefits, such as providing peace of mind and ensuring your affairs are handled by someone you trust, it’s not without challenges.

Durable Power of Attorney

A Durable Power of Attorney (DPOA) is a legal document that grants an agent or attorney-in-fact the authority to act on behalf of the principal (the person granting the power) in a variety of matters, and it remains in effect even if the principal becomes incapacitated. This distinguishes it from a general or limited power of attorney, which typically ceases to be effective if the principal loses mental capacity.

What rights does a durable power of attorney have? They can manage:

• Financial transactions, legal dealings, business or personal affairs, plus commonly Healthcare and Government benefits. 

Key Characteristics of Durable Power of Attorney:

• Durability: the key feature of a DPOA is its durability; it remains effective even if the principal becomes mentally incapacitated.
• Flexibility: the principal can specify exactly what powers the agent has, whether they are broad or limited to specific affairs.
• Immediate or Springing Effectiveness: it can be effective immediately upon signing, or it can be a “springing” DPOA that only becomes effective upon the principal’s incapacitation, depending on how it’s set up.

Considerations:

• Choosing an Agent: it’s crucial to choose someone who is trustworthy, reliable, and capable of handling the responsibilities.
• Legal Requirements: can vary by jurisdiction, so it’s important to ensure that the document complies with state laws.
• Revocation: while the principal is mentally competent, they can revoke the DPOA at any time.

Legal Responsibilities of an Attorney-in-fact 

Duties and obligations of an attorney-in-fact are to act in the principal’s best interests. It’s not a carte blanche to make decisions on a whim, rather it’s a fiduciary responsibility that requires careful consideration and legal decision-making.

• Financial duties – is required to provide a clear trail of where, why, and how the principal’s finances are managed.
• Personal Assets – must be separate from the principal’s to ensure there’s no confusion, potential mismanagement, or even fraud. 
• Conflict of Interest – to ensure decision-making upholds the principal’s welfare.

How to Appoint an Attorney-in-fact 

It may seem natural to appoint a close family member, but this might not always be the best idea. Here are some things to consider when appointing someone:

• Health Worries – grief and worry may cloud the judgment of those close to us when dealing with hospitals during times of crisis.
• Morally Sound & Reliable – having a reliable, trustworthy, agent who understands of your needs such as a close friend, a financial advisor or lawyer.
• Legal Implications – a lawyer can help you understand the authority you’re giving, and ensure the documentation is legal and enforceable.

The exact documents needed can vary depending on the jurisdiction and the specific powers you wish to grant. However, here is a general overview of the documents needed to appoint an attorney-in-fact:

1. Power of Attorney (POA) Document
2. Healthcare Power of Attorney (or Healthcare Proxy)
3. Living Will or Advance Directive
4. HIPAA Authorization Form

Can an Attorney-in-fact Act on Behalf of a Deceased Person? 

Power of attorney after death becomes null and void. In other words, an attorney-in-fact cannot act on behalf of a deceased person.

This is where probate comes in. In probate, the assets of a deceased person are distributed to their heirs and creditors.

The probate court oversees this process, not the deceased’s attorney-in-fact. The court appoints an executor (as named in the will) or an administrator (if there’s no will) who legally has the right to carry out the final wishes of the deceased in terms of asset management.

When an Attorney-in-fact is Useful: Practical Examples

Having someone to help with legal responsibilities and financial affairs, when you’re unable to handle things yourself, can help ensure your well-being and peace of mind.

By giving someone the legal responsibility to act as your agent, your interests will be protected no matter what life throws at you.

Ensure you think through people’s jobs and other commitments, for example:

• A globetrotter who’s often away from home, you need an attorney-in-fact to ensure financial affairs like bill payments, or tax submissions are taken care of.
• Temporary absences such as military deployment can use one to ensure that important matters are not left unattended.
• An attorney-in-fact with relevant professional experience can be invaluable when closing a real estate deal or managing a large investment portfolio.

Estate Planning

Estate planning is a comprehensive process that includes creating wills, setting up trusts, distributing assets, tax planning, healthcare directives, and more.

Done correctly, it ensures the smooth transfer of wealth and assets. Lawyers for estate planning are different to an attorney-in-fact largely. They can:

• Provide professional advice on how to structure your estate to minimize tax liabilities, avoid probate, and have extensive knowledge of the law to navigate the legal system.
• An attorney-in-fact can act on your behalf if you become incapacitated. They may not necessarily have a law background, but they would be someone you trust to make choices that align with what’s best for you.

Business & Legal Transactions 

One of the significant benefits of appointing an agent, is the ability to delegate tasks that require legal authorization as they will have a fiduciary duty. The agent can:

• Sign documents
• Managing bank accounts, including withdrawals, deposits, and transfers.
• Investment Management: Buying, selling, and managing investments
• Property Affairs: Buying, selling, leasing, and managing real estate
• Bill Payments: Paying bills, taxes, and handling other financial liabilities.
• Legal Representation: including litigation and business negotiations.
• Contractual Agreements: facilitate contracts on behalf of the principal.

Moreover, the agreement also comes with a fiduciary duty. This provides an additional layer of protection for the principal, be that an individual or legal entity, since the agent is obligated to act in its favor at all times.

Medical Emergencies

While a Durable Power of Attorney can include healthcare decisions, it’s more common for these matters to be handled by a separate document known as a Healthcare Power of Attorney or Healthcare Proxy. However, a DPOA can be drafted to include such powers if the principal wishes.

Power of attorney for healthcare decisions is crucial when someone becomes incapable of communicating or deciding about their medical care. 

It allows the agent to act quickly regarding medical procedures, treatments, and other medical services needed to improve the person’s condition or sustain their life.

1. Create a Healthcare Power of Attorney (HCPA) or Healthcare Proxy – to allow your appointed attorney-in-face to make healthcare decisions for you, such as about medical treatments, healthcare providers, and living arrangements that involve healthcare services.
2. Create a Living Will or Advance Directive – giving specific instructions about the types of medical treatment you do or do not want to receive in certain situations
3. Create a DNR (do not resuscitate) order, which is a medical order signed by a physician that instructs healthcare providers not to perform cardiopulmonary resuscitation (CPR) if your heart stops or if you stop breathing. This is based on your wishes, typically discussed in advance
4. Physician or Medical Orders for Life-Sustaining Treatments (POLST or MOLST) – forms designed for individuals with serious health conditions and outline a plan for end-of-life care.

Incapacitation

The unpredictable nature of life means there are times when someone becomes unable to take care of themselves. Whether for physical or mental incapacity, powers of attorney become increasingly relevant.

So who makes medical decisions if you’re incapacitated?

• In this case, if a durable power of attorney for healthcare has been established, it’s the attorney-in-fact who would assume the authority.
• By creating the necessary healthcare paperwork ahead of time, you can rest assured that in case of incapacitation, your preferences are respected and your affairs are handled competently.

Advantages of Appointing an Attorney-in-fact

An attorney-in-fact can be invaluable when it comes to handling personal matters. From medical decisions to real estate transactions or litigation, they can act on your behalf when you cannot. This is particularly beneficial during periods of illness or when specific expertise is required.

Other benefits include:

• Assurance of uninterrupted decision-making
• Things continue to run smoothly in your absence
• Financial transactions, bills, investments, and even taxes are handled on your behalf
• Saves time and secures your finances

The advantages of granting power of attorney extend beyond practicality. It’s so reassuring knowing that someone trustworthy is looking out for you and your interests. It’s like a safety net, protecting your interests and guaranteeing that your affairs are handled with care and with legality.

Conclusion

The role of an attorney-in-fact is to assist another individual with legal and financial matters. They wield considerable power, so understanding exactly what they do is crucial. 

They can make decisions about property, banking transactions, and even healthcare, acting in the best interests of the person they represent. 

Appointing an attorney-in-fact is not a decision to be taken lightly; it should be someone reliable and capable. So, when contemplating what an attorney-in-fact does, remember, it’s not just about the title, but also the trust, granted responsibility, and legal implications that come with it.