A parent, a close friend or a co-worker asks if you would mind being listed as their attorney-in-fact in their power of attorney. You inquire as to what an attorney-in-fact is and receive the nonchalant answer that it is similar to an agent, and it grants you the power to act on their behalf if something should happen. Then, your parent, your close friend or your co-worker adds there is nothing to worry about because they are perfectly healthy, but their attorney is paranoid and says they need a power of attorney. You agree, return to your work, and never give it a second thought.
A power of attorney gives an impression of simplicity. After all, Alaska's power of attorney is printed in the statutes with instructions. However, second thought should be given before accepting the designation as an attorney-in-fact. At a minimum, an attorney-in-fact should know when their authority begins, the scope of their authority and when their authority ends.
The language used in the power of attorney document determines when the attorney-in-fact's authority begins. A power of attorney usually delegates present or springing authority to the attorney-in-fact. Where a presently effective power of attorney grants the attorney-in-fact immediate authority, an attorney-in-fact's authority under a springing power of attorney is triggered upon a certain event (i.e., illness or mental incapacity). It is important for an attorney-in-fact to recognize whether the power of attorney they hold is durable. Durable means the power of attorney remains in effect in the event the principal becomes disabled, which is often when the power of attorney is crucial.
A principal that executes a power of attorney delegates to the attorney-in-fact the authority to manage the principal's affairs. This is defined in the law as an agency relationship. As a matter of law, the agent in this relationship, the attorney-in-fact, owes fiduciary duties to the principal in managing the principal's affairs. The principal's affairs may encompass financial dealings, medical decisions and parenting.
The attorney-in-fact does not receive the power of attorney with a list of dos and don'ts. The definition of fiduciary duties is imprecise and ambiguous. Instead, fiduciary duties are defined with words such as "integrity," "responsibility" and "ethically." At a minimum, an attorney-in-fact has four commonly known fiduciary duties: the duty to obey the principal's instructions; the duty of loyalty; the duty to care; and the duty to maintain records.
The duty to obey the principal's instructions prohibits the attorney-in-fact from replacing the principal's instructions with what the attorney-in-fact believes is best. An attorney-in-fact may encounter difficulties in carrying out the principal's instructions where the attorney-in-fact has different moral beliefs than the principal, or where the principal can make basic decisions such as what to eat or what not to eat, but is incapable of entering into a complex business transactions. Delicate circumstances may arise where the attorney-in-fact must balance the need to substitute their judgment for the principal's instructions. The attorney-in-fact must be cognizant that disobeying the principal's instructions, even in good faith, may subject the attorney-in-fact to liability.
The duty of loyalty requires that the attorney-in-fact act in a manner that benefits the principal in all matters. The attorney-in-fact is bound to avoid acts of self-dealing or conflicts of interest and to maintain the principal's confidences. The attorney-in-fact may disclose the principal's confidential information when it is necessary. For example, in obtaining appropriate medical care the attorney-in-fact may need to disclose the principal's medical records. An attorney-in-fact is prohibited from making gifts to him or herself or changing a life insurance beneficiary designation to him or herself (an exception is provided for spouses), unless the power of specifically grants this power to the attorney-in-fact.
The duty of care necessitates that the attorney-in-fact act with the reason, diligence and skill of an ordinary person under similar circumstance. In other words, the attorney-in-fact must act prudently in managing the principal's affairs. If the attorney-in-fact has specialized skills, then those skills must be utilized. Where the attorney-in-fact lacks necessary skills, then the attorney-in-fact may have a duty to delegate. For example, the principal's affairs may involve filing a complicated tax return and the attorney-in-fact is a civil engineer within minimal tax law knowledge. In this situation, the attorney-in-fact is obligated to engage a capable accountant.
The attorney-in-fact also bears the fiduciary duty of maintaining records. Records may include accounting, investments or medical records depending on the principal's affairs.
Finally, the attorney-in-fact must understand when the power of attorney terminates their authority. The termination of an attorney-in-fact's authority depends on the language in the power of attorney. A power of attorney will terminate upon the principal's revocation and it always terminates at the principal's death.
As a practical matter, an attorney-in-fact should inquire where the principal keeps their original power of attorney. While Alaska's statutes provide that an attorney-in-fact is authorized to carry out their duties with a copy of a power of attorney, many financial institutions do not accept a copy. In time-sensitive situations with an incapacitated principal, it is key to know the location of the original power of attorney.
Accepting a parent's, a close friend's or a co-worker's request to become their attorney-in-fact deserves more than a passing thought. It may encompass a significant amount of time, liability and difficult decisions. With this mind, as an attorney-in-fact you may have the opportunity to help someone you care about when they need it the most.
Marie P. Evans is with the firm Manley & Brautigam, P.C. She may be reached at (907) 334-5600 or at Marie@mb.law.pro.
