Choosing an Attorney-in-Fact

After learning about the job of an attorney-in-fact, it may be clear to you who you want to name. But sometimes it's tough to know whom to choose. Perhaps your spouse or partner is ill or wouldn't be a good choice for other reasons. Or you may not know anyone that you feel entirely comfortable asking to take over your financial affairs. Or, if you have an active, complex investment portfolio or own a business, you might decide that your attorney-in-fact needs business skills, knowledge or management abilities beyond those of the people closest to you.

If you're not sure whom your attorney-in-fact should be, then read the rest of this section and discuss the issue with those close to you.

If you can't come up with a family member or close friend to name, then you may want to consider asking your lawyer, business partner or banker to serve as attorney-in-fact. If you really 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.

Avoid Family Conflict

If there are long-standing feuds among family members, then they may object to your choice of attorney-in-fact 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, then you may want to discuss the troubles with a knowledgeable lawyer. A lawyer can review your estate planning documents and might help you feel reassured that your plans will be carried out as you wish.

Choose Someone Nearby, If Possible

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

Although overnight mail, email, smartphones, Skype 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 day-to-day 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 attorney-in-fact and that person lives far away, then you may have to settle for the less-than-ideal situation.

Name a Person, Not a Bank

Don't name an institution, such as a bank, as attorney-in-fact. It isn't legal in some states and it's definitely not desirable. Serving as attorney-in-fact is a personal responsibility and there should be 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, then 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 attorney-in-fact and your spouse over how to manage property that belongs to both spouses.

EXAMPLE: Henry and Amelia, a married couple, each create a durable power of attorney for finances. Henry names Amelia as his attorney-in-fact, but Amelia names her sister Anna. Later, Amelia becomes unable to manage her financial affairs and Anna takes over as her attorney-in-fact. Soon, Anna and Henry are arguing bitterly over what should be done with the house and investments that Henry and Amelia own together. If they can't resolve their differences, Henry or Anna may have to go to court and ask a judge to determine what is in Amelia's best interests.

However, if your spouse is ill, quite elderly or simply 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 whom the attorney-in-fact 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, then 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, then 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 attorney-in-fact will not have authority over property in your living trust. To avoid conflicts, it is usually best to have the same person managing both trust property and nontrust property if you become incapacitated. So, normally, you'll name the same person as successor trustee and as your attorney-in-fact.

EXAMPLE: Carlos, a widower, prepares a revocable living trust to avoid probate and a durable power of attorney for finances in case he becomes incapacitated. He names his son, Jeffrey, as successor trustee of the living trust and attorney-in-fact under the durable power of attorney.

Several years later, Carlos has a stroke and is temporarily unable to handle his everyday finances. Jeffrey steps in to deposit his father's pension checks and pay monthly bills, using his authority as attorney-in-fact. As successor trustee, he also has legal authority over the property Carlos transferred to his living trust, including Carlos's house.

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 attorney-in-fact might exercise a lot of personal discretion.

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 attorney-in-fact to sell, note them down and let your attorney-in-fact know 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 important 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.