What Is An Attorney-In-Fact?

What is an Attorney in Fact

In real estate and other endeavors, individuals or entities often need people to act on their behalf. Agents bring the time, experiences, resources and abilities to perform tasks that the principal cannot always accomplish themselves.

A power of attorney is one vehicle by which one person becomes an agent of and is able to act for another.

Those who rely upon powers of attorney seek to plan for the future handling of affairs in the event of aging or extended time away from home, or when time and distance make the principal unable to handle specific actions.

Does an attorney in fact need a real estate license?

No. A real estate license is not required for a real estate agent to serve as an attorney-in-fact, whether under a general power of attorney or one limited to real estate transactions.

In fact, a real estate agent involved in the transaction should not serve as an attorney-in-fact for purposes of signing the closing.

Doing so creates a substantial possibility of conflicts of interest.

In particular, a real estate agent who stands to earn a commission from the sale of real estate likely should not be the one signing the closing documents or executing the deed in the name of the purported seller.

This leads to the greater discussion of who should serve as an attorney-in-fact. The spouse or family members of the principal constitute natural choices, given their familiarity with the property, bank accounts and other affairs of the principal.

Those who choose a spouse or family member, or anyone for that matter, should examine the proposed agent’s qualifications and own personal situation.

Would-be agents with mental or physical problems might lack themselves the capacity to make decisions for the principal.

Those encountering current financial problems or who have a record of malfeasance or crime may see the position of agent as an opportunity to raid the resources of the principal.

What is the difference between power of attorney and attorney in fact?

The power of attorney is the document that a principal uses to appoint someone to act in his or her place and defines the parameters under which that person acts for the principal.

In the power of attorney, the principal lists the specific authorized actions, such as buying or selling property, signing contracts, deeds or checks; paying bills or taxes, and hiring professionals.

While the power of attorney is the document, the “attorney in fact” is the agent named in it.

The person designated as “attorney in fact” exercises the powers for which the power of attorney provides. With the status of attorney in fact comes for the agent duties to act in the principal’s best interests and with loyalty to the principal.

As discussed later, these fiduciary obligations shape who can be named as an attorney-in-fact by a power of attorney.

How do you write a power of attorney?

In drafting the power of attorney, principals consider the purpose because it often determines the scope and duration.

Broad or Limited?

A principal who gives an attorney-in-fact broad powers often does so as part of estate planning or preparing for the principal’s elder years.

Broadly-worded powers of attorney give the agent the authority over much of a person’s financial affairs. These powers include banking, investments, handling credit cards, utility and other bills and collecting amounts due to the principal,

As to real estate, the attorney-in-fact may be authorized to obtain repairs to or maintain the property, paying taxes or the mortgage, engaging listing or selling agents to market the property, making or accepting offers and going to closings.

These acts may come into play for a principal who may later not have the physical or mental ability to remain on or take care of the property.

A principal might want a more limited power of attorney when the person is not available to perform the acts necessary to consummate the transaction.

This is where a principal may benefit from a limited power of attorney for real estate transactions. In such a document, the attorney-in-fact assumes the authority to sign the deed, settlement statement and other documents at a real estate closing.

Often, the seller appoints an attorney-in-fact for these limited functions because the seller lives out-of-state or perhaps will be out of the country.

Termination of the Power of Attorney

When preparing a power of attorney, think about how and when the attorney-in-fact’s authority ends. Broad powers-of-attorney used in estate planning often provide that they continue in effect when the agent becomes incompetent, or unable to handle his or her own affairs.

A particular situation might call for a limited time frame, such as only for the time the principal is away or until a specific date or the passage of time.

Limited real estate powers of attorney may terminate upon the closing or completion of the particular real estate sale.

It may prove best that an attorney-at-law prepares a power of attorney.

In fact, the preparation of a power-of-attorney constitutes the drafting of a legal document and, thus, the practice of law.

Authorized practice of law rules and regulations may prohibit non-lawyers from preparing powers of attorney for use by others.

Can an attorney in fact appear in court?

The answer to this question requires that you understand the difference between an attorney-in-fact and attorney-at-law.

The former acts as an agent of a principal.

Agents appointed by a power of attorney do not become lawyers for the principal and are not, by the fact of being named in a power of attorney, authorized to perform legal services for the principal.

The privilege of representing people in court belongs to attorneys licensed to practice law. Licensed attorneys normally confine their services to such legal services as filing lawsuits, appearing in court, real estate closings and preparing legal documents.

Legal services typically do not entail paying bills, handling bank accounts or other daily non-legal actions left to attorneys-in-fact.

Even without a license to practice law, attorneys-in-fact do have a role in legal proceedings or legal disputes.

Depending on the language of the power of attorney, the agent has authority to decide whether to file or defend a lawsuit on the principal’s behalf, whether and how to settle a case and otherwise to protect the legal rights and interests of the principal.

To those ends, the agent may hire a licensed attorney-at-law.


More to explorer

Comments are closed.