This section explains the responsibilities your attorney-in-fact will have toward you and your property.
Commonly, people give an attorney-in-fact broad power over their finances. But it's up to you. Using Nolo's Durable Power of Attorney for Finances, you can give your attorney-in-fact authority to do some or all of the following:
You can tailor your durable power of attorney for finances to fit your needs by choosing which powers you grant and placing certain conditions and restrictions upon the attorney-in-fact. For example, you can give your attorney-in-fact authority over your real estate, with the express restriction that your house may not be sold.
The attorney-in-fact you appoint in your durable power of attorney is a fiduciary—someone who holds a position of trust and must act in your best interests. The law requires your attorney-in-fact to:
These standards do not present problems in most simple situations. For example, if you just want your attorney-in-fact to sign for your pension check, deposit it in your bank account and pay for your basic needs, there is little possibility of uncertainty or dispute.
Sometimes, however, these rules impose unnecessary hardships on an attorney-in-fact. For example, your property may already be mixed with that of your attorney-in-fact, and it may make good sense for that to continue. We allow you to insert clauses in your power of attorney document that permit your attorney-in-fact to deviate from some of the rules above, so that the attorney-in-fact's freedom isn't unnecessarily fettered.
Your attorney-in-fact must be careful with your money and other property. State laws require an attorney-in-fact to act as a prudent person would under the circumstances. That means the primary goal is not to lose your money.
The attorney-in-fact may, however, make careful investment moves on your behalf. For example, if your money is in a low-interest bank account, the attorney-in-fact might invest the money in government bonds, which pay higher interest but are still very safe.
Because most people choose a spouse, close relative or friend to be attorney-in-fact, your power of attorney makes your attorney-in-fact liable only for losses resulting from intentional wrongdoing or extreme carelessness—not for a well-meaning decision that turns out badly.
Your attorney-in-fact is legally required to keep accurate and separate records for all transactions made on your behalf. Good records are particularly important if the attorney-in-fact ever wants to resign and turn the responsibility over to another person.
Record keeping isn't an onerous requirement. The attorney-in-fact must simply be able to show where and how your money has been spent. In most instances, it's enough to have a balanced checkbook and receipts for bills paid and claims made. And because the attorney-in-fact will probably file tax returns on your behalf, income and expense records may be necessary.
EXAMPLE: Keiji appoints Kathryn, his niece, to serve as his attorney-in-fact. Keiji receives income from his savings, two IRAs, Social Security and stock dividends. Kathryn must keep records of the income for bank and tax purposes.
You and your prospective attorney-in-fact should discuss and agree on what record keeping is appropriate. The attorney-in-fact may also want to review your current records now to make sure they're in order. If you don't have clear records, the attorney-in-fact may have to spend a lot of time sorting things out later.
As part of managing your finances, the attorney-in-fact may hire a bookkeeper, accountant or other financial adviser and pay for the services from your property.
Many people wonder how the attorney-in-fact signs checks and other documents on behalf of the principal. Exact procedures vary depending on both local custom and the procedures of a particular financial institution or government agency. In some places, after establishing authority with a particular institution or agency, the attorney-in-fact will sign his or her own name to checks and documents, followed by "POA" or other language such as "under power of attorney dated June 15, 20XX." In other locations, the attorney-in-fact will first sign your name and then his or her own name, followed by the "POA" designation.
When you make Nolo's Durable Power of Attorney, you will need to enter the name of your attorney-in-fact. This is the most important decision you must make when you create a durable power of attorney.
Depending on the powers you grant, the attorney-in-fact may have tremendous power over your property. You need to 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.
Remember that you can't count on anyone to keep an eye on the attorney-in-fact once he or she takes over your finances. If your attorney-in-fact 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 a power of attorney is designed to avoid. And there's no guarantee that money an incompetent attorney-in-fact lost would ever be recovered. This reality is not intended to frighten you needlessly, but simply to underscore the need to make a careful choice about who will represent you.
Any competent adult can serve as your attorney-in-fact; 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 he or she accepts 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 would be willing, if your choice doesn't know about the document, confusion and delay are inevitable if you become incapacitated.
In most situations, the 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.
Read more about Choosing an Attorney-in-Fact.
Set aside time to talk with your attorney-in-fact about when to start taking care of financial tasks for you. You can agree that your attorney-in-fact 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. With respect to exercising authority under the document, your attorney-in-fact 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.
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 normally not paid if the duties won't be 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 he or she takes over. No single strategy works best for everyone. Choose the approach—and the amount—that feels right to you.
If you name more than one attorney-in-fact and you want to pay them, the amount you enter—for example, $5,000 per year or $18 per hour—applies to each one. If you want to allow your attorneys-in-fact to determine a reasonable amount for their services, each is allowed to set his or her own fee.
Your power of attorney prints out with an information sheet you can give to your attorney-in-fact explaining the responsibilities of the job. You can use this document to help you remember the main issues when talking with your attorney-in-fact.