Power of Attorney Rights & Responsibilities

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Both the giver and receiver of powers under a power of attorney have rights and responsibilities. The giver, usually called a principal, uses a power of attorney to allow the receiver, called an attorney-in-fact, or agent, to act for her. An attorney-in-fact can receive authority in a number of the principal's affairs, including financial transactions, real estate matters and even gift giving. An attorney-in-fact and principal should be aware of each others rights and responsibilities to avoid mistakes and confusion.

Principal Rights

A principal can grant broad powers or limited powers to her agent -- she has the right to restrict these powers on the power of attorney at the time of creation. She also keeps the right to make her own decisions while she's able to do so. The principal decides if the powers go into effect immediately, or only if she can't make her own decisions because of incapacitation. The principal can also revoke the power of attorney at any time.

Agent Rights

A proposed agent has the right to decline to act as an agent, and a current agent has the right to resign for any reason. An agent who wants to resign should let the principal know in writing. If he's in the middle of a transaction for the principal, he might be held liable for losses if he doesn't finish the deal. An agent can charge for his services as long as the power of attorney doesn't state otherwise. The fee must be reasonable for the area and the service provided. Most states require the agent request the compensation in writing within a certain number of months after acting. For example, an agent in Indiana must ask for compensation within 12 months of performing the action.

Principal Responsibilities

A principal must advise the agent of her decisions when she asks him to act on her behalf. Her instructions must be clear. If she's vague, the agent might not be held responsible for her losses in court if he makes a mistake. The principal must notify the attorney-in-fact and other persons or businesses that have the power of attorney on file, such as banks, if the powers are revoked. If she fails to follow through on this obligation when she ends the powers, the attorney-in-fact and other parties might not be liable for actions that occur after the revocation date.

Attorney-in-Fact Responsibilities

The attorney-in-fact is responsible for carrying out the powers honestly and according to the principal's wishes. She must not use the power of attorney for anything other than what the document allows and notify the principal when she completes actions on her behalf. An attorney-in-fact should keep a written log of her activity on behalf of the principal to protect herself legally; the court or the principal can ask her to account for her actions at any time. The principal typically makes decisions and the attorney-in-fact carries them out. Some actions, such as signing the principal's will, are not allowed under most state laws, even if the document gives the attorney-in-fact power in that area. An attorney-in-fact should check state laws regarding powers to make sure she's taking an illegal action because she is responsible for knowing what she's allowed to do.

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