The Key Differences Between Attorney-in-Fact and Power of Attorney
There’s nothing easy about “legalese.” Specialized terminology in the legal field is notoriously difficult for the average person to understand, but so important that learning those that will impact you during your life is essential.
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Almost everyone will deal with estate planning — deciding the fate of an individual’s assets after death — in some form during their lives, either distributing, managing and preserving your own estate or someone else’s.
As you start to assess the inventory of assets and belongings you have accumulated during your lifetime, you’ll need to establish directives, account for your family’s needs and review beneficiaries.
During this difficult process, you may need to seek professional help and possibly assign power of attorney (POA) to a designated individual who will be responsible for acting on your behalf for a variety of legal and financial matters upon your death.
So, it’s important to know what power of attorney is and how it’s related to, but different from, attorney-in-fact.
What Is Power of Attorney?
According to SmartAsset, power of attorney is a “grant of authority which allows someone to legally binding decisions for you and on your behalf.” It’s a legal document through which you (the principal) appoints someone that “grant of authority.” The document specifies the powers and the scope of the assigned person’s authority.
Typically, you can assign authority how you see fit, granting decision powers in a general capacity (wherein a person can make almost any legally binding decision on your behalf, within limits), a limited capacity (the person performs duties which were expressly assigned by the principal) or a specific capacity or special circumstances (someone can only make specific, defined decisions).
For example, an accountant will often be granted limited financial power of attorney by a principal and a realtor may be granted specific power of attorney to arrange the selling of a principal’s house. Additionally, as SmartAsset explains, power of attorney can be granted as durable (remaining in effect until you revoke it or if you become incapacitated for any reason) or temporary (specifies when that power will end).
According to LegalZoom, power of attorney can be granted to an individual for various financial, medical, legal or business purposes, such as:
Paying bills and signing checks
Buying, selling and managing real estate
Conducting business transactions
Borrowing money
Handling legal or insurance claims
Filing tax returns
Making donations or gifts
Making medical decisions
What Is an Attorney-in-Fact?
Firstly, to contradict the title, an attorney-in-fact doesn’t have to be an attorney at all. They don’t need to pass the bar, practice law or have a professional license (hence, they are often called “agents” instead).
Whereas power of attorney is a document granting authority over legal, business, medical or financial affairs, an attorney-in-fact is someone who is designated to act on behalf of you in those affairs. An attorney-in-fact is designated through the power of attorney (usually) by the person who will be represented.
So, to use the examples above, if you assign an accountant and a realtor power of attorney over your financial matters and to sell your home, respectively, they become attorneys-in-fact. They need to be a trusted agent who will act on your behalf and to your specified directions.
While it’s important to ensure your power of attorney documents are executed to reflect your wishes and in accordance with your state’s laws, it’s equally important to choose attorneys-in-fact carefully, so they act in your best interest and don’t abuse your trust.
Learn More: How Much Does the Average Middle-Class Person Have in Savings?
Trusting powerful authority to family members and licensed professionals will give you peace of mind, as you begin your life’s wind-down routine or become incapacitated.
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