Attorney in Fact vs Power of Attorney

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Attorney in Fact vs Power of Attorney

Life is often unpredictable and filled with unforeseen complications which is why it’s important to understand the options available to those who must plan for everything, including attorney in fact vs. power of attorney.  Occasionally, illness, disabilities, or the outcome of certain events may make it harder to make financial decisions or conduct business as one normally would. In some cases, a person may be out of the country for an extended time and needs someone to be physically present at a bank or other institution.

When a situation arises that requires someone else to make decisions or be physically present for you, it is a good practice to have someone with the power of attorney to make decisions, sign documents, and handle financial matters for you.

By granting authority to another person, you are protected if you cannot make a decision. This can feel like a grim decision to have to make, but planning and ensuring that your decisions are accounted for can be one of the best decisions that you can make while you are able. It ensures that you are taken care of when you cannot do it yourself. This article will outline what power of attorney is, who an attorney in fact is, and describe how they can do their job without actually practicing law.

The “Attorney” Who Does Not Practice Law

When people see the word “attorney,” they often think of an attorney at law, another term for lawyers that practice law. And while most times they are referring to an attorney at law, there is another term that uses the attorney moniker, specifically attorney in fact. An attorney in fact is a designated person with the granted authority to make decisions and control aspects of a person’s life when they are unable to for any reason but is not necessarily authorized to practice law.

The designation of this power is called the power of attorney. So the attorney in fact has the power of attorney to act on behalf of the person who needs assistance, called the principal. Attorneys in fact are also occasionally called the agent of the principal.

The attorney in fact has a fiduciary duty to act in the best interest of the principal. This means that they are acting in good faith to do what they believe is the best thing for the principal either legally or financially. However, they must act within their assigned power. Legal and financial decisions made by the attorney in fact are legally binding on the principal as if they were made by the principal themselves.

A principal can overrule the decision of the agent, but this only extends to the same parameters as if the principal made the decision. For example, a principal could overrule a decision to go to a medical appointment made by the attorney in fact by canceling the appointment, but they cannot overrule a decision to sign a legal document selling a car if that is within the agent’s authority.

Assigning Power of Attorney

There are several types of ways to assign power of attorney to the attorney in fact. In each case, the attorney document outlines the extent of the power of attorney and the authority given to the attorney in fact. Once the agent has the power of attorney form, they can carry out their powers as outlined in the attorney document. It can be helpful to have an attorney at law prepare the document to ensure that the personal matters of the principal are adequately protected.

General Power

This is the most broadly powerful of the ways that power of attorney can be granted. An attorney in fact with general power is legally qualified to participate in decision-making on behalf of the principal to the same extent as the principal, except for the areas that are expressly exempt, such as armed forces enlistment and granting themselves power over the principal’s assets.

Limited Power

A limited power of attorney grants the agent the authority to act on behalf of the principal in a specific area. This is most commonly granted in either financial power of attorney or medical power of attorney. For example, an agent with limited medical power of attorney can make medical decisions for the principal, but cannot make financial decisions.

Special Power

Finally, an agent with a special power of attorney can only act on behalf of the principal for a very special reason. For example, a principal may give an agent the ability to deposit money in their bank account while they are outside the country. This power of attorney would end as soon as the principal returns.

Types of Power of Attorney

There are two important characteristics that a power of attorney can take related to the timing and applicability of the power being granted.

Durable Power

A durable power of attorney continues until it is explicitly revoked or the principal dies. This ensures that an attorney in fact never questions whether the court or bank will accept their power of attorney. It also ensures that when a person dies, the executor and the trustee can handle the financial decisions and trust assets after death without the attorney in fact. In comparison, a temporary power of attorney only authorizes the agent to act on the principal’s behalf until a specific point or event.

Springing

A springing power of attorney will only take effect under certain conditions. For example, a power of attorney might give a person the power to make medical decisions on their behalf only if they become incapacitated.

Because there are various ways to grant authority, it is important to talk to a lawyer and sign a document that clearly outlines the requirements.

Making a Family Member an Attorney in Fact

Because they do not defend actions, represent the principal or other parties in court, or practice law, they are only making decisions on behalf of the principal, the attorney in fact does not need to be a lawyer or have any experience with legal services or legal matters. They do not require special qualifications or education to be given such authority, only that they keep the best interests of the principal in mind.

This means that family members, close friends, or acquaintances can be an attorney in fact and serve as an agent. However, most people prefer to have someone that they trust to fulfill their responsibilities and duties with care. In many cases, this means that a close friend or family member is the person authorized.

You can also appoint more than one person to be an attorney in fact, but the hierarchy or fail-safe needs to be outlined in the power of attorney documents. The assumption with multiple agents is that they will need to all be able to agree to a decision; however, as anyone who works in some form of decision-making knows, this is nearly impossible for every decision. For this reason, a principal will often outline who is authorized to decide if no agreement can be reached or if the majority will control the responsibilities of the attorneys in fact.

The Tasks that an Attorney in Fact Can Perform

An agent can perform a variety of tasks that can be included in the powers given to them.

Open, Close, and Manage Bank Accounts

An attorney in fact can open, close, and manage bank accounts. This means they can withdraw funds to pay bills or deposit money when the principal cannot.

Sell Property

An agent may be able to sell a property or sign documents to do so on another’s behalf. This is common when an elderly person needs to sell their home but cannot participate effectively.

Final Thoughts

Because an attorney in fact is acting on behalf of the principal, it is important to fully understand the commitment to the principal. If you are considering appointing an agent or becoming one, it is important to speak to an attorney about the outcome it may have on you and your loved ones.

Whether you’re traveling abroad for an extended period of time, or just preparing for the unexpected, choosing someone who you trust to make decisions on your behalf when you are unable to do so brings peace of mind. Now that you have a clearer understanding of attorney in fact vs power of attorney, you are one step closer to gaining that peace of mind.

To learn more about estate planning, mediation, and alternative dispute resolution, contact ADR Times for educational materials and training courses on a variety of mediation and dispute resolution topics.

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Emily Holland
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