Does "Power of Attorney" Mean You're Responsible for Decedent's Debt?

Power of attorney is the legal authority one person grants another allowing the recipient to carry out specific actions on the grantor's behalf. Receiving power of attorney does not mean you become responsible for the grantor's debts, though it may mean you have the duty to look after the grantor's affairs, including her debts. Power of attorney laws differ slightly between states, so talk to an attorney in your area if you need legal advice.

Parties

Powers of attorney involve two primary parties: the person granting the power and the person receiving the power. The principal is the person who grants power of attorney to someone else. A principal has to be an adult of sound mind to grant power of attorney, and must do so in accordance with the laws of the state in which he lives. The person, or organization, receiving the power of attorney is known as either the agent or the attorney-in-fact, though this person does not have to be an attorney, nor does receiving power of attorney grant the person the right to practice law.

Duties and Debts

An attorney-in-fact's powers are as broad or as limited as the principal chooses. A principal, for example, can grant you financial power of attorney and have you be responsible for paying his debts on time using his assets. As the principal's agent you have a fiduciary duty to serve the principal's best interests and thus must pay the bills as required. However, the attorney-in-fact is not the debtor and is not personally liable to the creditor for unpaid debts.

Terminations

A power of attorney stops when either the principal voluntarily terminates the power or when the principal dies. No powers of attorney continue past the principal's death, so if you've been given any kind of power of attorney, financial or otherwise, your ability to act on behalf of the principal stops automatically as soon as you learn of the principal's death. Prior to death, the principal can terminate the power of attorney if and when she chooses.

Deceased Principal

While a power of attorney doesn't continue after death, you may be able to continue to act on your former principal's interests after he dies. When a person dies, his property is known as his estate. Estate property has to go to new owners through the probate process. In this process a probate court will appoint an estate executor or representative, a person who has the responsibility to settle unpaid estate debts and transfer estate property to new owners. This executor's financial powers may be very similar to those the agent had while the principal was alive, but an executor is not an attorney-in-fact, and vice versa.