Designating Your Attorney-in-Fact

Designating Your Attorney-in-Fact

by Brette Sember, J.D., January 2019

A power of attorney document allows you to choose another person—called the attorney-in-fact—who can make business and financial decisions on your behalf. Although the word "attorney" is used, the attorney-in-fact can be anyone you choose and doesn't need to be someone who can practice law.

Older couple in kitchen looking at iPad

How a Power of Attorney Works

A power of attorney is a legal document that you, the principal, create. Each state has its own forms, so it is important that you use the form that is correct for your state. The document allows you to name another person, the attorney-in-fact, who can take actions with regard to your financial and business affairs without your presence. This can be useful if you're going to be out of the country, have a lot of business interests you can't manage yourself, and for estate planning purposes so that—should you become incapacitated—someone else can pay your bills and manage your money for you.

Powers and Duties of an Attorney-in-Fact

The specific acts the attorney-in-fact can take vary by state but, in general, a power of attorney authorizes them to do the following on your behalf:

  • Run your business
  • Pay personal and business bills
  • Make financial gifts from your funds
  • Access and manage your bank and investment accounts
  • Buy and sell real property
  • Transfer assets into or out of a trust
  • Take out or pay off loans
  • Collect government benefits
  • Buy insurance policies

It is the duty of an attorney-in-fact to act in the principal's best interest, and not in their own interest. They are responsible for acting honestly in the role. They should keep records of the actions they perform and be careful to keep the principal's property separate from their own.

Types of Powers of Attorney

There are several types of power of attorney documents you can choose from:

  • Durable power of attorney. This document goes into effect when you sign it and remains in effect until you die or you revoke it. It has "durable" in its name because it remains in effect if you become incapacitated or disabled.
  • Special or limited power of attorney. This type gives your attorney-in-fact the ability to represent you in a specific transaction or for a set period of time. An example would be if you gave your son the authority to sell your home for you. This type of power of attorney document is effective only for the task or time period you specify and then it expires.
  • Springing power of attorney. A springing power of attorney is set up to become effective at a future date or upon the happening of a future event. Commonly it's set up to become effective if the principal become incapacitated and unable to make decisions. Once that event happens, the power of attorney takes effect, allowing the attorney-in-fact to act.
  • Medical or healthcare power of attorney. A medical power of attorney has to do with healthcare decisions, not business and financial decisions. It is also commonly called a healthcare proxy, and it names the person who makes healthcare decisions on your behalf when you are not able to do so.

Acting as Attorney-in-Fact

To act as an attorney-in-fact, you will need to bring the power of attorney document with you and show it to prove you have the authority to act. If you sign documents in this role, sign them as "[Your Name], Attorney-in-Fact for [Name of Principal]."

Choosing an attorney-in-fact is an important decision. You should select someone you trust and also name an alternate should your original choice not be available or able to serve. You can create a power of attorney document yourself, or you can work with an attorney or an online service provider to create one.