An attorney-in-fact is a person authorized by a power of attorney to act in the place of someone else. An attorney-in-fact, also sometimes called an agent, can have specific responsibilities, such as making decisions about medical care. Or the responsibilities may be very broad, authorizing the attorney-in-fact to sign legal documents and make investment and other financial decisions on behalf of the grantor of the authority. Consider working with a financial advisor as you put together or modify your estate plan.
A power of attorney is the legal document that transfers authority to the attorney-in-fact. Powers of attorney come in several different varieties. One of the primary differences is when the power of attorney becomes effective. Durable powers of attorney go into effect immediately. Springing powers of attorney become effective when some event occurs, such as the mental incapacitation of the grantor.
The powers of the attorney-in-fact can vary widely depending on the type of power of attorney. A medical power of attorney, for instance, limits the attorney-in-fact to making healthcare-related decisions. A medical power of attorney may give the attorney-in-fact the ability to decide to discontinue life support for the grantor.
A general power of attorney is often used in estate planning. It gives the attorney-in-fact broad powers. These could include conducting banking transactions, managing real estate, paying taxes, settling insurance claims, deciding how to invest an IRA, run a business and make other business and financial transactions.
A special power of attorney is more limited. It could restrict, for instance, the attorney-in-fact to making particular decisions affecting the grantor’s business for a specific period of time.
Generally, an attorney-in-fact has the responsibility of making decisions with the best interests of the grantor of the power of attorney in mind. The attorney-in-fact will be expected to act in good faith, act only within the limits described in the power of attorney document and avoid conflicts of interest.
An attorney-in-fact may also be required to maintain records of any decisions or transactions taken using the authority of the power of attorney. This may include receipts, account statements, loan documents and property records.
Selecting an Attorney-in-Fact
Grantors normally select someone they regard as highly trustworthy to act at their attorney-in-fact. The attorney-in-fact will be expected to carry out the grantors’ wishes whenever written guides, such as wills, don’t provide enough detail or relevance. Grantors often select a family member, such as an adult offspring, to act as their attorney-in-fact.
In addition to being trustworthy, the attorney-in-fact will ideally have the business, financial or other knowledge to effectively execute the grantor’s wishes, or be able to consult with competent advisors when making technical decisions.
Many people going through the estate planning process name an executor of the estate in addition to an attorney-in-fact. The executor is responsible for seeing that the wishes of the person are carried out after death, according to the terms of the will. The attorney-in-fact is responsible for carrying out the wishes of the grantor during the grantor’s life. Both positions are can be filled by the same person and often are.
Changing Attorney-in-Fact Powers
While creating a power of attorney is likely to require a notary and one or two witnesses to the signature of the grantor, it can be much easier to modify or revoke one. Often, all the grantor has to do is notify the attorney-in-fact in writing that the power of attorney has been modified or canceled.
After revoking or modifying an attorney-in-facts powers, it’s a good idea to notify banks, brokerages, insurance companies and other organizations the grantor does business with about the change. If the power of attorney has been filed at the local courthouse, it may be necessary to file a formal revocation, complete with signatures, witnesses and notarization.
An attorney-in-fact adds flexibility for estate planning by naming a trusted person with the ability to make decisions in the interests of the person granting the powers. Depending on the specifics of the power of attorney document, the attorney-in-fact may be able to manage a broad array of business, financial, health and other matters for the grantor. Offspring and other close relatives often serve as attorneys-in-fact. While attorneys-in-fact can exert nearly complete power over the grantor’s affairs, especially with a broad general power of attorney, the grantor can revoke or modify the powers of the attorney-in-fact if necessary.
Estate Planning Tips
- A qualified and experienced financial advisor can help illuminate the decision about naming an attorney-in-fact when planning an estate. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area who can help you with that. You can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Determining your overall estate planning needs is an important step to make sure that your financial affairs are in order, especially if something happens to you and you aren’t able to make your own decisions. Use our comprehensive estate planning guide to understand all of the components of estate planning.
- It’s never too late to start building an emergency fund – even retirees need one. Use our free budget calculator and savings account reviews to help allocate and set one up for yourself.
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