A common misnomer is to refer to the person who you have designated to make legal decisions on your behalf as your “Power of Attorney”. The most Succinct way to refer to this person would be as your “Attorney in Fact”. The “Power of Attorney” only refers to the document needed to designate the person who can speak for you in legal matters.
Attorney-in-Fact
The person you name as Attorney-in-Fact is charged, as your fiduciary, with making financial decisions using the highest standards of good faith, fair dealing, and undivided loyalty in making decisions in your best interests, while keeping your goals and wishes in mind at all times. Your Attorney-in-Fact’s power, however, is limited in two important ways.
First, an Attorney-in-Fact is only permitted to act while you are still alive. Once you pass away, the Attorney-in-Fact loses all power. Second, an Attorney-in-Fact only has control over those assets not held in a trust, as trust assets are governed by a Trustee. These two limitations are indicative of the fact that an Attorney-in-fact is only ever meant to be a liaison of your wishes.
The Powers and Duties of an Attorney-in-Fact
An Attorney-in-Fact is allowed to conduct any investment or spending actions that the principal would reasonably take, providing those duties are outlined in the Power of Attorney. This means that an Attorney-in-Fact, in this case, would be able to open and close bank accounts, withdraw funds, trade stocks, pay bills or cash checks, all on the behalf of the principal.
Another commonly used Power of Attorney is when an elderly person grants General Power of Attorney to their child. This would allow the child to help with bills and other financial matters that may be outside the scope of the ability of the elderly person. This is especially beneficial if the older person is immobile or otherwise bedridden, and can’t travel to a bank for their financial matters.
If a principal believes that a General Power of Attorney gives too much power to someone else, they can designate an Attorney-in-Fact as a Special Power of Attorney. Using the same example as above, if an elderly person is normally mobile but recently underwent surgery, they can grant Special Power of Attorney to their child to pay their bills while they recover. However, all Attorneys-in-Fact are required to keep a fiduciary duty, meaning that the best interest of the principal must be upheld.