A power of attorney is a legal document in which one person, known as the principal, appoints another, known as an attorney-in-fact, to sign documents and perform acts on his behalf. The powers granted to an attorney-in-fact under a power of attorney terminate upon the death of the principal, but in some states, that termination may be conditioned upon actual knowledge and not affect everyone at the moment of death.
An attorney-in-fact that uses a power of attorney after knowledge of the death of the principal may be held personally liable for damages caused by his acts. The court may award damages in a court of law in favor of the heirs or beneficiaries under the estate of the deceased. If, however, the attorney-in-fact acts in good faith without knowledge of the death of the principal, he may be protected under some states’ laws,
A person who relies on or accepts a power of attorney in good faith without knowledge of the death of the principal cannot in some states be held liable for damages caused by that acceptance. If the party is aware of the death and is acting in collusion with the attorney-in-fact to dispose of the decedent’s property, then he may be held liable.
A person who acts in good faith without knowledge of the death of the seller when purchasing assets of the deceased by deed or other document executed by an attorney-in-fact may be able to keep the property in some states. The heirs may only be left with the option of recovering the cash proceeds received from the sale from the attorney-in-fact. A court of law may be called upon to determine the disposition of the assets in such a transaction. To attempt to prevent this situation, many attorneys or title companies relying on a power of attorney require the attorney-in-fact to execute an affidavit that the principal is alive at the time of the execution of the conveyance document.
Executor or Heirs
One duty of an executor will be to notify banks, other financial institutions, attorneys and all other parties who might be called upon to rely on a power of attorney of the principal’s death. This might save estate assets from damages caused by the acts of an unscrupulous attorney-in-fact.