Attorney-in-Fact vs. Power of Attorney

When you need someone to make legally binding decisions on your behalf, you grant them that authority with a power of attorney form. There are many titles for the person who exercises this authority on your behalf. One such title is “attorney-in-fact.” Here’s what you need to know about this aspect of estate planning and what capabilities may be granted to an attorney-in-fact through power of attorney.

Consider working with a financial advisor as you evaluate whether to delegate such authority to another person.

What Is Power of Attorney?

Power of attorney is a grant of authority that allows someone to make legally binding decisions for you and on your behalf. When you grant someone this authority, they have the power to act in your place, meaning their decisions are as binding for you as if you had made them yourself. A power of attorney can sign contracts for you, execute financial transactions and even make medical decisions in the case of medical power of attorney.

While you can overrule the decisions made by a power of attorney, you can only do so to the extent that you could change your own mind about a legal action. For example, say your power of attorney opens a new bank account in your name. In that scenario, you’re free to close that bank account the next day and transfer out all the funds. But if your power of attorney signed a contract to sell your home for you, you couldn’t then decide that you could get a better price and void the deal. That contract is as binding as if you had signed it yourself.

Assigning Power of Attorney

There are generally three ways to assign someone power of attorney:

General. With a general power of attorney, the person can make almost any legally binding decision on your behalf as if you had made it yourself. The only limits on this assignment are those set by law. For example, no state allows a power of attorney to enlist their principal in the armed forces or to enrich themselves with their principal’s assets.
Limited. The person can make legally binding decisions on your behalf, but within a certain scope of authority. For example, it is common to give an accountant financial power of attorney so that they can file their clients’ taxes. The accountant has the authority to access their client’s finances and make financial decisions consistent with preparing and filing tax paperwork, but they have no authority outside of that scope, such as taking possession of client assets.
Specific or special. The person can only make specific, narrowly defined decisions with this type of power of attorney. For example, someone might give a trusted realtor power of attorney to sell their house. The realtor would have the authority to sign the relevant contracts for that transaction, but nothing else.

Power of attorney can be either durable or temporary. A durable power of attorney continues until you explicitly revoke it, while a temporary power of attorney grant specifies when that power will end. Power of attorney can also be “springing,” meaning that it only takes effect under certain conditions. For example, say you establish a durable springing power of attorney in case of incapacitation. This grant would last indefinitely but would only take effect at times that you’re incapacitated.

Every state has different laws regarding the scope of power of attorney and how it’s defined. However in most, if not all, states you must assign power of attorney in writing. This grant must be notarized. The same is typically true for revoking or amending power of attorney.

What Is an Attorney-in-Fact?

Attorney-in-fact is one of the many possible titles for the person to whom you grant power of attorney. For example, say you grant financial power of attorney to your accountant so they can prepare and file your taxes. Your accountant will then act as your attorney-in-fact for the purposes of filling out your tax forms and submitting them on your behalf to the IRS.

It is more common to call this person your agent. Attorney-in-fact is a technical and relatively rarely used term.

Note that your attorney-in-fact does not need to be a lawyer, nor do they need to have any kind of professional license at all. Despite the language surrounding power of attorney and attorney-in-fact, this authority has nothing to do with practicing law. That said, an attorney or licensed financial advisor can make a good choice for an attorney-in-fact because those jobs often come with legally enforceable fiduciary duties that give you recourse in case they abuse your trust. Other common choices when granting power of attorney are family members or trusted friends.

Limits of an Attorney-in-Fact’s Authority

Even though a power of attorney gives your attorney-in-fact the ability to act on your behalf, there are clear limits to what they can do. They cannot create or amend your will, alter the terms of a trust or change the beneficiaries on accounts, such as life insurance policies or retirement plans. They also cannot vote in public elections for you or make decisions that go beyond the authority specifically granted in your power of attorney document.

Just as importantly, their authority ends at your death. Once you pass away, only the executor named in your will or appointed by the court has the legal right to manage your estate.

Courts also provide oversight in cases where an attorney-in-fact is suspected of abuse or misconduct. Because the role carries fiduciary duties, an attorney-in-fact is legally required to act in your best interest and keep clear records of financial transactions. If they misuse funds, act outside the scope of authority or use the position for personal gain, beneficiaries or other interested parties can bring the issue to court. The court can revoke the authority, order repayment of misused funds or impose other penalties.

For these reasons, it is common to place specific instructions or restrictions in the power of attorney document. For example, you might limit authority to paying bills, managing investments or signing medical forms, while excluding the ability to sell property or make large financial gifts. Adding these limitations helps prevent misunderstandings with third parties, such as banks or healthcare providers, and also gives you greater confidence that your attorney-in-fact will act only in the ways you intend.

Understanding the limits of an attorney-in-fact’s authority helps you make a more informed decision when selecting someone for this role. Choosing the right person and drafting the power of attorney with clear instructions ensures that your interests are protected while reducing the risk of disputes later.

Bottom Line

Power of attorney gives someone legal authority to act on your behalf. This person is called your attorney-in-fact. However, this power does not include the ability to change your will or trust. It ends when you die or earlier, depending on the type of power given. You can also limit when or how it applies, such as only if you become incapacitated, and you can revoke it at any time.

Tips on Estate Planning

A financial advisor can help you coordinate your financial strategies and tactics with estate planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s estate planning guide to find critical information on aspects of the process, including power-of-attorney laws specific to the state you live in.