A power of attorney is a powerful legal document that allows the person who executes it, known as the principal, to appoint another person, known as an agent or attorney-in-fact, to perform legal acts on his behalf. Normally, a power of attorney automatically terminates by operation of law as soon as the principal dies. Limited exceptions exist, however.
Many state power of attorney statutes allow agents to retain the authority to perform specific acts even after the death of the principal. Missouri and Indiana, for example, allow a principal to authorize an agent to consent to an autopsy and to make anatomical gifts of the principal's body. Indiana allows a principal to authorize his agent to make plans for the disposition of his corpse.
If the principal authorizes his agent to engage in financial transactions on his behalf -- the purchase of a house, for example -- and then dies before the transaction is completed, the agent might proceed with the transaction anyway. Once the transaction is completed, the seller may enforce its terms against the principal's estate, as long as three conditions are met: the agent must have presented the seller with an apparently valid power of attorney, the principal must have communicated directly with the seller concerning the transaction before he died, and the seller must not have known or had reason to know of the principal's death.
If an agent continues to engage in transactions with third parties on behalf of the principal even after learning of the principal's death and, thereby, binds the principal's estate to those transactions, the executor of the principal's estate will have a valid civil claim against the agent for any damages he caused the estate.
In many cases, a principal will authorize his agent to engage in transactions such as signing a contract on his behalf. By signing a purchase contract on behalf of the principal, for example, the agent obligates the principal to pay the purchase price. If the agent signs a purchase contract on behalf of the principal and the principal later dies, the obligation to pay the purchase price does not lapse simply because the contract was signed by an agent whose authority has since lapsed -- the principal's estate becomes liable for the debt.