Power of attorney:

Power of Attorney is granted to a person called an Attorney In Fact. The attorney in fact acts as an agent of the grantor and uses his/her power of attorney to conduct activities as if they were the actual person that granted the authority. Power of attorney can be used for both private and business matters.

Here’s a real life example:

My friend Mark owned a vacant lot near Whidbey Island, Washington. He planned on selling it and asked me to help him. I could not do what he wanted unless he granted me the required legal authority. My lawyer created a power of attorney document and Mark signed it in front of a notary, thus appointing me as his attorney in fact. I now had authority to act on Mark’s vacant lot as if I were Mark in the eyes of the law.

Does an Attorney In Fact need to be a Lawyer?

No, you do not need to be a lawyer. Of course, a lawyer can be an attorney in fact for someone, but it is not a requirement. I am not a lawyer and I have been attorney in fact so many times I can’t even remember the number.

Why would someone need to grant Power of Attorney?

Examples:

A person who is travelling out of the country and needs someone to review and sign legal documents while he/she is gone.
A person with significant business interests that needs a trusted person to act on his/her behalf for certain matters.
A senior citizen that is having difficulties with his/her financial affairs and needs on-going help with banking or investments.
A person doing estate planning and is making provisions in case they become incapacitated.

Fiduciary responsibility:

The attorney in fact is considered to have a fiduciary responsibility. This means they must act in good faith and trust at all times. They also must put the interests of the client ahead of their own in all matters related to their actions.

Are there different kinds of Power of Attorney?

Yes. Some come into effect the instant they are signed, some come into effect upon a triggering event, like incapacitation. Plus, there are different types. Two examples are Special Power of Attorney and Durable Power of Attorney.

Special Power of Attorney:

The authority in a Special Power of Attorney is limited. The example I gave earlier for my friend Mark was a special power of attorney. My authority was confined to his vacant lot and no other matters related to his financial or personal holdings.

Durable Power of Attorney:

Durable Power of Attorney is much more encompassing. It gives the attorney in fact a wide range of authority to make decisions and to take action.

Durable power of attorney is frequently used in estate planning. It revolves around the concept of what would happen if a person becomes incapacitated, either temporarily or permanently. Upon the triggering event, the attorney in fact becomes authorized to act.

On the other hand a perfectly aware and capable person can grant this all encompassing power. I have been durable power of attorney 3 times for individuals that simply did not want to handle their affairs personally.

Selection of an Attorney In Fact:

Of course, the individual being considered to grant power of attorney must be capable of performing the assigned duties and also be willing to do so.

Capability also means the attorney in fact is wise enough to know his/her capability limits. That’s when he/she should seek out professional advice. This holds especially true for matters that should be advised by an attorney at law (lawyer) or a CPA.

I think the key factor in selection however, is trust. An attorney in fact is acting as if they were the grantor as far as the law is concerned and any mistakes they make can fall squarely on the shoulders of the grantor. If your attorney in fact screws up, you can be left holding the bag.

Acceptance of the power of attorney document:

It can be a little frustrating to get certain institutions to recognize the original power of attorney document because they want it on their own form. Then you have to wind up going back to the grantor over and over again to execute yet another power of attorney document for the exact same thing, but on their form.

Banks, investment firms, the IRS and state tax boards are great examples of this. For example, in my experience the IRS will not accept any power of attorney document except their own, which is Form 2848. One time I had 5 separate power of attorney’s for a guy with the exact same authority provided in the original. The only difference being that the financial institutions were finally satisfied because their own form was being used.

What does power of attorney mean?

For the grantor, selection of an attorney in fact should be a very careful one. That person should be able, willing and absolutely trustworthy.

For anyone who is asked to be an attorney in fact, be aware that acceptance of the role puts you in a fiduciary capacity where the client interests supersede your own.

Remember, with empowerment comes responsibilities. Good luck and stay safe!

Contact me at: ldr@landdevelopmentrealities.com