Attorney-in-Fact

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Attorney-in-fact is the term used to refer to a person authorized, through a power of attorney document, to act on behalf of another person. An attorney-in-fact is endowed with specific powers and responsibilities in the legal document, which may be very broad, or very narrow, depending on the needs of the person executing the document (the “principal”). To put it simply, an attorney-in-fact is an agent of the principal. To explore this concept, consider the following attorney-in-fact definition.

Definition of Attorney-in-Fact

Noun

  1. A person designated by a power of attorney document to act on behalf of the authorizer outside of court.

What is an Attorney-in-Fact

An attorney-in-fact is a person authorized to conduct transactions, or to handle other matters, on behalf of another person. The person naming someone else to act as an agent on his behalf, referred to as the “principal,” not only names his attorney-in-fact in a power of attorney document, but also specifies the scope of authority the agent has. An attorney-in-fact can be given authority to conduct most types of transactions for a principal, with the exception of appearing in court in many cases.

An attorney-in-fact has a fiduciary responsibility to act in the principal’s best interest in every situation, and may be liable for intentionally acting outside his permitted duties, or in a manner that is harmful to the principal. The powers of an attorney-in-fact are valid only while the fiduciary is living. Once the principal passes away, the attorney-in-fact’s authority ends.

For example:

John signs a power of attorney document, naming his sister Mary as his attorney-in-fact, after learning he has cancer. This allows Mary to manage John’s affairs, pay his bills, and manage his bank accounts while he goes through chemotherapy. John can choose to revoke the power of attorney at any time, but if he passes away, Mary’s authority ends.

What is Fiduciary Duty

A Fiduciary duty exists when one person has an obligation to act in the best interest of another person or entity. Fiduciary duty is an important factor when one person places a particular trust in, and reliance upon, the actions of another. Such is the case when someone appoints an attorney-in-fact. An attorney-in-fact has a fiduciary duty to use good judgment and honesty when acting on the principal’s behalf. In the U.S. legal system, fiduciary duty is considered to be a serious issue, and intentionally or negligently breaching a fiduciary duty may result in the fiduciary being financially liable.

Duties of an Attorney-in-Fact

The duties of an attorney-in-fact vary, depending on the specifics of the power of attorney document. Most commonly, duties of an attorney-in-fact entail taking care of the principal’s financial affairs. In the case of a broad power of attorney document, such duties may allow the attorney-in-fact to step into the role of the principal to undertake whatever banking, investment, or other matters may be needed. These activities may include opening or closing bank accounts, paying bills, trading stocks, and withdrawing funds from accounts.

In some cases, a principal may need an attorney-in-fact to act on his behalf only for a specific transaction. This might occur when a principal is purchasing property in another state, or needs someone else to handle the purchase of a car. The applications for a limited power of attorney are nearly endless. In such a case, the attorney-in-fact’s duties are limited to the specified activity outlined in the power of attorney document.

For example:

Ned, who lives in New York, wants to move to California to be near his siblings and parents. Because of the distance involved, Ned decides to have his brother, Michael, locate a suitable home, and take care of the purchase. Ned signs a power of attorney, naming Michael as his attorney-in-fact, and specifically giving Michael authority to act on his behalf in all matters related to the purchase of the property, including the signing of loan documents. Because the power of attorney is limited to this specific purpose, Michael has no authority to do any other business on his brothers behalf.

Liability of Attorney-in-Fact

An attorney-in-fact can be held liable if he willfully acts in a manner that is not in the best interest of the principal. He may also be held liable if he acts with gross negligence, causing damages to the principal. In either case, the principal may seek payment by filing a civil lawsuit against the attorney-in-fact. In a case where the attorney-in-fact acts deliberately to defraud or otherwise harm the principal, he may face criminal charges as well.

Qualifications of an Attorney-in-Fact

In most jurisdictions, there are no required qualifications of an attorney-in-fact. The designated individual must be of legal age, and be capable of performing the duties specified in the power of attorney. While it is common for people to name an attorney as their attorney-in-fact, it is by no means required. In fact, as an estate planning tool, many people name relatives or close friends to fill the role of attorney-in-fact in the event they become incapacitated. This is known as a “springing” power of attorney, as it springs into action only upon incapacitation.

Reasons for Designating an Attorney-in-Fact

One of the most common reasons for designating an attorney-in-fact is to enable someone trustworthy to handle the principal’s affairs should he become incapacitated due to illness or injury. A power of attorney for this purpose specifies that the attorney-in-fact’s powers become effective only when the principal becomes incapacitated. An individual may also choose to designate an attorney-in-fact for a wide variety of temporary or limited situations. This may include a temporary illness, or an extended trip out of the country.

For example:

Linda, who lives by herself, suffered a fractured pelvis in a car accident. While this injury does not mentally incapacitate her in a way that would trigger a springing power of attorney, it does make it nearly impossible for Linda to take care of her own affairs while she is healing. Linda signs a power of attorney naming her daughter, April, as her attorney-in-fact, giving her broad powers to handle any of Linda’s affairs. When Linda again becomes able to take care of things, she need only send a written letter revoking April’s authority as attorney-in-fact to terminate the power of attorney.

What is a Healthcare Attorney-in-Fact

While a general power of attorney gives a named attorney-in-fact authority to transact business on the principal’s behalf, a healthcare power of attorney gives an attorney-in-fact authority to make medical decisions. It is possible to include such a section in a general power of attorney, but it is highly recommended that a healthcare power of attorney be created as a separate document altogether.

In a healthcare power of attorney, the principal can specify certain desires as to his healthcare, and name his healthcare attorney-in-fact specifically. Usually, at least one alternative healthcare attorney-in-fact is named, to make decisions in the event the primary attorney-in-fact becomes unavailable, or is unable to fill the position for any reason.

A healthcare power of attorney can only be created and signed while the principal is mentally competent, and only goes into effect when or if he becomes incompetent. Because of this, a healthcare power of attorney is a springing power of attorney.

Real Life Attorney-in-Fact Abuse of Powers

In 1997, Viola and Clyde Copas signed a power of attorney appointing their son, “RC,” as attorney-in-fact, and giving him unrestricted authority to act on their behalf. Clyde passed away in 1998, Viola passed away in 2005. Immediately following his mother’s death, RC was appointed the Personal Representative of the estate. RC’s two siblings found that, as attorney-in-fact and executor of the estate, he had mishandled their parents’ affairs, siphoning money off for himself.

The siblings filed a lawsuit asking to have RC removed as executor of the estate, as well as an award of monetary damages. The court ruled in the siblings’ favor, stating, “The court finds he’s a thief,” and that RC’s “use of his power of attorney was abusive and that he used it to profit himself.” During the proceedings, RC had admitted taking over $700,000, though the total missing from the siblings’ share of the estate was nearly $900,000.

In the end, the court awarded RC’s siblings a total of over $2 million in damages, plus over $102,000 in attorney’s fees. Abuse of his authority as an attorney-in-fact ended up costing RC well over $2 million, and may have subjected him to criminal charges, depending on the specifics of the case, and whether the siblings chose to pursue prosecution.

Related Legal Terms and Issues

  • Authority – The right or power to make decisions, to give orders, or to control something or someone.
  • Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
  • Fiduciary – A person to whom power, property, or assets have been entrusted for the benefit of another.
  • Incapacitated – To be unable to act or respond.
  • Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.
  • Liable – Responsible by law; to be held legally answerable for an act or omission.
  • Principal – An individual that appoints another person to act as an agent on his behalf.