Choosing an Attorney-in-Fact

Choosing an attorney-in-fact is the most critical decision you must make when you create a durable power of attorney. Depending on the powers you grant, the attorney-in-fact, called your agent in many states, may have tremendous control over your property. You must choose someone you trust completely. Fortunately, most of us know at least one such person—usually a spouse, relative, or close friend. If there's no one you trust completely with this authority, a durable power of attorney isn't for you.

Finding one person to name may not be a problem for you. Instead, you may feel you need to name multiple agents for your power of attorney. But if you find yourself wanting to name co-agents in a power of attorney, you should think twice. Below, this article explains in detail why appointing co-attorneys-in-fact can create conflict and disrupt the handling of your finances.

Remember that you can't count on anyone to keep an eye on an attorney-in-fact after the job begins. If your agent handles your affairs carelessly or dishonestly, the only recourse would be a lawsuit—usually not a satisfactory approach. Lawsuits are burdensome and expensive, and would entangle your loved ones in all the legal red tape that a power of attorney should avoid. Don't be needlessly frightened by this reality; it should simply underscore the importance of making a careful choice about who will represent you.

Who to Choose as Your Attorney-in-Fact

Any competent adult can serve as your agent; the person most definitely doesn't have to be a lawyer. But don't appoint someone without first discussing it with that person and making sure they accept this serious responsibility. If you don't, you may well cause problems down the line. The person you've chosen may not want to serve, for a variety of reasons. And even if the person were willing, if your choice doesn't know about the document, confusion and delay are inevitable if you become incapacitated.

In most situations, an attorney-in-fact does not need extensive experience in financial management; common sense, dependability, and complete honesty are enough. If necessary, your attorney-in-fact can get professional help—from an accountant, lawyer, or tax preparer, perhaps—and pay for it out of your assets.

If you're not sure who your attorney-in-fact should be, then read the rest of this article and discuss the issue with those close to you. Suppose, however, that you can't come up with a family member or close friend to name. In that case, you may consider asking your lawyer, business partner, or banker to serve as attorney-in-fact. If you know and trust the person, then it may be a good option for you.

Keep in mind that it's better not to make a durable power of attorney than to entrust your affairs to someone in whom you don't have complete confidence.

Avoiding Family Conflict When Choosing an Attorney-in-Fact

If there are long-standing feuds among family members, they may object to your choice of agent or the extent of the authority delegated. If you foresee any such conflicts, then it's wise to try to defuse them in advance. A discussion with the people who are leery of the power of attorney might help.

If you still feel uncomfortable after talking things over, consider discussing the troubles with a knowledgeable lawyer. A lawyer can review your estate planning documents and might help you feel reassured that your agent will carry out your plans as you wish.

Choose Someone Nearby, If Possible

To carry out duties and responsibilities promptly and adequately, it's usually best that the attorney-in-fact live nearby.

Although overnight mail, email, smartphones, video calls, and other technology have made it easier to conduct business long-distance, it's still best for your attorney-in-fact to be close at hand—or at least willing to travel and spend time handling your affairs when needed. After all, this is the person who will be responsible for the everyday details of your finances: opening your mail, paying bills, looking after property, and so on.

Of course, many families are spread across the country these days. If there's only one person you trust enough to name as your agent, and that person lives far away, then you may have to settle for the less-than-ideal situation.

Don't Name a Bank as Your Attorney-in-Fact

Don't name an institution, such as a bank, as attorney-in-fact. It isn't legal in some states, and it's certainly not desirable. Serving as attorney-in-fact is a personal responsibility, and there should be a personal connection and trust between you and your attorney-in-fact. If the person you trust most happens to be your banker, then appoint that person, not the bank.

If You're Married, Probably Name Your Spouse

If you're married or partnered, you'll probably want to name your spouse as your attorney-in-fact unless there is a compelling reason not to do so.

There are powerful legal and practical reasons, in addition to the emotional ones, for appointing your spouse. The main one is that naming anyone else creates the risk of conflicts between the agent and your spouse over how to manage property that belongs to both spouses.

That said, if your spouse is ill, quite elderly, or not equipped to manage your financial affairs, then you may have to name someone else as attorney-in-fact. The wisest course is for you and your spouse to agree on who the agent should be, perhaps one of your grown children.

Also, keep in mind that divorce may not end your spouse's authority. In many states, if your spouse is your attorney-in-fact, that designation does not automatically end if you get divorced. Wherever you live after a divorce, you should revoke the power of attorney and create a new one, naming someone else as your new attorney-in-fact.

If You Have a Living Trust, Name Your Trustee

If you have created a revocable living trust, then the successor trustee you named in the trust document will have power over the trust property if you become incapacitated. If you and your spouse made a living trust together, the trust document almost certainly gives your spouse authority over trust property if you become incapacitated.

Creating a durable power of attorney for finances doesn't change any of this. Your agent will not have authority over property in your living trust. To avoid conflicts, it is usually best to have the same person managing trust property and nontrust property if you become incapacitated. Typically, you'll name the same person as both your successor trustee and attorney-in-fact.

Naming More Than One Attorney-in-Fact

In general, it's a bad idea to appoint co-agents in a power of attorney. Conflicts between co-attorneys-in-fact could disrupt the handling of your finances. Also, some banks and other financial institutions prefer to deal with a single attorney-in-fact.

Legally, you can have more than one attorney-in-fact. But it's often better to pick one person for the job and explain your reasoning to the others now. If you name more than one person and they don't get along, they may wind up resolving their disputes in court. The result might be more bad feelings than if you had just picked one person to be your agent and explained your choice in the first place.

Make Decisions Together or Independently

If you name more than one attorney-in-fact, you'll have to grapple with the question of how they should make decisions. You can require co-agents to carry out their duties in one of two ways:

• co-agents must all agree before taking any action on your behalf, or
• co-agents may make decisions independently of one another.

Both methods have strengths and pitfalls, and there's no hard-and-fast rule on which is better. Choose the approach that feels more comfortable to you.

Requiring your attorneys-in-fact to act jointly ensures that decisions are made carefully and with the knowledge of everyone involved, but coordinating multiple decision makers can be burdensome and time-consuming. On the other hand, allowing your attorneys-in-fact to act separately makes it easy to get things done, but allowing two or three people to make independent decisions about your finances can lead to poor record keeping and general confusion. For example, your attorneys-in-fact may independently take money out of your bank accounts or buy and sell stock without full knowledge of what the others are doing to manage your investments.

If Co-Agents Disagree

If your attorneys-in-fact get into a dispute that interferes with their ability to represent you properly, they may need help working things out. Getting help could mean submitting the dispute to mediation or arbitration—or going to court to have a judge decide what's best. In your document, you can allow your attorneys-in-fact to choose how they want to handle the matter, keeping in mind that their foremost responsibility is to act in your best interest. The downside of all this is not just that there could be confusion and delays in handling your finances, but that you'll probably be the one to pay the costs of settling the dispute. All these are reasons to name just one attorney-in-fact.

If One or More Cannot Serve

Usually, if you name more than one attorney-in-fact, the person you name as a first alternate will take over only if all of your attorneys-in-fact must give up the job. If any number of your first choices can continue to serve, they may do so alone, without the addition of your alternate.

If you name a second alternate, that person will usually take over only in the improbable event that all of your named attorneys-in-fact and your first alternate cannot serve.

Naming Alternate or Successor Agents

It's a good idea to name someone to take over as your attorney-in-fact in case your first choice can't serve or needs to resign. When naming alternates, use the same criteria that you used to make your first choice for attorney-in-fact. Your successor agent should be every bit as trustworthy and competent. If you don't know anyone you trust well enough to name as a first or second alternate, skip the matter altogether.

Someone you ask to serve as an alternate attorney-in-fact may be worried about possible liability for the acts of the original attorney-in-fact. To protect against this, your power of attorney can state that a successor attorney-in-fact is not liable for any acts of a prior attorney-in-fact.

You can also authorize your attorney-in-fact to appoint someone to serve if all those you named cannot. You do this by giving your attorney-in-fact permission to delegate tasks to others. Allowing your attorney-in-fact to delegate their job to someone else eliminates the risk that the position might become vacant because of the original attorney-in-fact's disability or resignation. If this occurs, and you haven't named a successor or none of your successors are available, your durable power of attorney would be useless. A conservatorship proceeding would be necessary to appoint someone to manage your finances.

Paying Your Attorney-in-Fact

You can decide whether or not you want to pay your attorney-in-fact. If you do, you can specify your payment arrangement.

In family situations, an attorney-in-fact is usually not paid if the duties aren't complicated or burdensome. If your property and finances are extensive, however, and the attorney-in-fact is likely to devote significant time and effort managing them, it seems fair to offer compensation for the work. Discuss and resolve this issue with the proposed attorney-in-fact before you finalize your document.

If you decide to pay your attorney-in-fact something for managing your financial affairs, you can set your own rate—for example, $10,000 per year, $20 per hour, or some other figure on which you agree. Or, if you don't want to decide on an amount right now, you can allow your attorney-in-fact to determine a reasonable wage when the job begins. No single strategy works best for everyone. Choose the approach—and the amount—that feels right to you.

Typically, if you name more than one attorney-in-fact and you want to pay them, the amount you choose applies to each one. If you're going to allow your attorneys-in-fact to determine a reasonable amount for their services, you can let each set their own fee.

Talk With Your Attorney-in-Fact

It's critically important that you talk with your attorney-in-fact, not just to be sure your choice is willing to take on the job of handling your finances, but to be sure your representative understands what that job entails. Sit down and discuss the list of powers you grant, being especially careful to cover those areas where your agent might exercise a lot of personal discretion.

You'll also want to be clear about when your agent should start taking care of financial tasks for you. You can agree that your agent should not exercise any authority under the document unless you become completely unable to take care of yourself and your property, or unless you otherwise direct.

Finally, now is the time to clarify any special needs or concerns that you have. For example, if there are certain items of personal property you'd never want your agent to sell, note them down and discuss how you feel. Or, if you are allowing your attorney-in-fact to make gifts to help out family members or other loved ones who need help, talk frankly about whom you'd feel comfortable helping, as well as when and to what extent.

There is one caveat here: While it is wise to let your attorney-in-fact know what your wishes are, it's generally a bad idea to create a lot of complicated restrictions. There is no way to know what the future will bring—and, ideally, your attorney-in-fact will have enough flexibility to take whatever actions are necessary to take care of you. It is essential to let your attorney-in-fact know what you want, but also to trust your choice enough to make the right decisions when the time comes.

Always remember that, when it comes to exercising authority under the power of attorney document, your agent is legally required to follow your wishes. If you become dissatisfied with your attorney-in-fact's actions, and you are still of sound mind, you can revoke the durable power of attorney and end your attorney-in-fact's power to act for you.

More Information About Durable Powers of Attorney for Finances

Remember, choosing your attorney-in-fact is the most important thing you'll do when making a durable power of attorney. If you don't know who to choose or are worried about family disagreements down the line, consult an experienced estate planning lawyer for personalized advice.

To learn more about durable financial powers of attorney, see the following articles:

• What Is a Durable Power of Attorney?
• When Does a Durable Power of Attorney Take Effect?
• Signing and Notarizing a Durable Power of Attorney
• Attorney-in-Fact: Meaning, Powers, and Responsibilities

You can learn more about making WillMaker’s durable power of attorney for finances in WillMaker’s Legal Manual.