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Definition - What does Attorney-in-Fact mean?

An attorney-in-fact is the individual assigned to perform a specific task for a specific purpose for another individual. The action may include a business or personal transaction. The authority, however, is only granted in relation to specific functions identified.

The attorney-in-fact need not be a licensed attorney, but is granted legal authority through an instrument in writing, generally a power of attorney.

Durable power of attorney

The most common attorney-in-fact is the durable power of attorney. This legal document will allow another person, assigned by the principal, to act on their behalf under specific circumstances. For example, if the principal party is no longer competent to perform certain tasks or manage their legal and personal affairs the durable power of attorney would have the legal right to negotiate with third parties.

The durable power of attorney should have the proper business judgment and skills. They should have the moral capacity to manage the principal’s affairs properly, and they should be able to objectively make decisions which are in the principal’s best interest.

Although the durable power of attorney may be another family member or close friend, it can also be another legal agent such as a bank officer.

Deciding who to appoint as your attorney-in-fact

An attorney-in-fact should be someone highly trusted by the principal. It can be any competent person over the age of 18, including brothers and sisters, children, or a spouse.

The attorney-in-fact must be able to keep good records and provide an account of all matters on a quarterly or monthly basis. An attorney-in-fact can be revoked at any time by written statement by the principal.

Abuse and the attorney-in-fact

Unfortunately, abusing the powers as an attorney-in-fact is not uncommon. In fact, many people have used their powers of attorney-in-fact to change beneficiaries of the principal’s bank accounts, steal items from safe deposit boxes, and to gift monies to themselves or their family members from the principal’s estate in which they are not entitled.

Responsibilities of the attorney-in-fact

The attorney-in-fact has several important responsibilities.

  • Their actions must be in the best interest of the principal, which means they must be in the same manner as a “ordinarily prudent person” when managing their own affairs.
  • All reimbursements made to the attorney-in-fact must be documented.
  • Actions must be done competently, diligently, and in good faith.
  • They must identify themselves as the attorney-in-fact and must stop acting on behalf of the principal if the relationship is terminated (ex. death, dissolution of the agreement, divorce, separation, or annulment).

If you have questions about your responsibilities as an attorney-in-fact you should talk to an estate lawyer prior to agreeing to serve. Consider, you as the attorney-in-fact may be liable if your actions or inaction performed in bad faith result in injury to the principal.

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