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An Attorney-in-Fact is an individual authorized to act on behalf of another person through a power of attorney, handling financial and legal matters as specified in the agreement.
An Attorney-in-Fact is a person designated through a legal document called a power of attorney to act on behalf of another individual, known as the principal. This appointment grants the attorney-in-fact authority to make financial, legal, or personal decisions for the principal as outlined in the power of attorney document. It is important to note that an attorney-in-fact need not be a licensed attorney; they can be any trusted individual or professional appointed by the principal. The scope of their authority may be broad or limited, depending on the specific terms specified in the power of attorney.
The attorney-in-fact plays a critical role in investment strategy implementation and asset management for high-net-worth clients or family offices by providing a legally authorized representative to act promptly on the principal’s behalf. This can facilitate timely financial decisions, asset transfers, and compliance with administrative requirements without interruption caused by the principal’s absence or incapacity. It also supports continuity in reporting and tax filings, essential to avoid penalties and ensure efficient tax planning.
A family patriarch, anticipating future health issues, grants his adult child power of attorney, naming them as his attorney-in-fact. This allows the child to manage investment accounts, pay property taxes, and handle banking matters on behalf of the patriarch during periods he is unable to manage his affairs. For example, if the patriarch's investment portfolio requires rebalancing, the attorney-in-fact can execute trades per the predetermined strategy without delay.
Power of Attorney vs Attorney-in-Fact
While 'Attorney-in-Fact' refers to the individual authorized to act on behalf of another, the 'Power of Attorney' is the legal document that grants this authority. The power of attorney outlines the scope, duration, and limitations of the attorney-in-fact's powers. Without a power of attorney, there is no attorney-in-fact.
Does an attorney-in-fact have to be a lawyer?
No, an attorney-in-fact does not have to be a licensed attorney. It can be any trusted individual or professional appointed by the principal to act on their behalf according to the power of attorney document.
Can an attorney-in-fact make decisions after the principal's death?
No, the authority of an attorney-in-fact ends when the principal passes away. After death, the executor or trustee typically manages the principal’s estate or trust.
How is an attorney-in-fact appointed?
An attorney-in-fact is appointed through a legal document called a power of attorney, which specifies the extent of their authority and can be customized to meet the principal's needs.