What Is an Attorney-in-Fact?
An attorney-in-fact is a person who is authorized to perform business-related transactions on behalf of someone else such as the principal of a company.
In order to become someone's attorney-in-fact, the principal must sign a power of attorney document. This document designates the person as an agent, allowing him to perform actions on the principal's behalf. An attorney-in-fact acts as the principal's agent but is not necessarily authorized to practice law.
An attorney-in-fact takes two forms. The first type is a general power of attorney which allows the attorney-in-fact to conduct all business and sign any document on behalf of the principal. The second type is a special power of attorney, which outlines the matters in which the attorney. This document allows the attorney-in-fact to sign documents and conduct business on the principal's behalf only in specific situations.
It's important to note that an attorney-in-fact does not need to be a practicing attorney. The principal can appoint anyone to be the attorney-in-fact—even family members—as long as the document is signed.
All attorneys-in-fact are required to keep a fiduciary duty, meaning that the best interest of the principal must be upheld.
Anyone assigning an attorney-in-fact should take care to choose someone who won't steal their assets.
The Powers and Duties of an Attorney-in-Fact
If the attorney-in-fact is designated as a general power of attorney, he or she is allowed to conduct any investment or spending actions that the principal would reasonably take. This means an attorney-in-fact would be able to open and close bank accounts, withdraw funds, trade stocks, pay bills, or cash checks—all on behalf of the principal.
For example, an elderly person may grant the general power of attorney to his child to help pay bills and other financial matters that may be outside the scope of the elderly person's ability. This is especially beneficial if the older person is immobile or otherwise bedridden and can't travel to a bank.
If a principal believes a general power of attorney gives too much power to someone else, he can designate an attorney-in-fact as a special power of attorney. So if the same elderly person is temporarily immobile because of recent surgery, he can grant special power of attorney to his child to pay his bills while he recovers.