One of the useful documents in the estate planner\u2019s tool kit is the power of attorney.\u00a0 Briefly, a power of attorney allows a person (the \u201cprincipal\u201d) to name another individual (the \u201cagent\u201d or the \u201cattorney-in-fact\u201d) to act on the principal\u2019s behalf, typically in financial and health matters. A power of attorney may be \u201cgeneral\u201d or \u201climited,\u201d meaning it can authorize the attorney-in-fact to act broadly on the principal\u2019s behalf, or it may restrict the attorney-in-fact\u2019s authority to certain enumerated types of conduct (i.e., a limited power of attorney may apply solely to acts involved in the sale of a principal\u2019s real estate). In addition to being \u201cgeneral\u201d or \u201climited,\u201d a power of attorney may also be \u201cdurable,\u201d meaning the power of attorney remains effective in the event of a future disability or incapacity of the principal. For purposes of this article, the power of attorney is to be considered a durable general power of attorney, meaning the power of attorney is effective immediately upon execution, it authorizes the attorney-in-fact to act broadly on the principal\u2019s behalf, and it remains effective in the event of any subsequent disability or incapacity of the principal.<\/p>\n
New Jersey\u2019s Revised Durable Power of Attorney Act, as codified in N.J.S. 46:2B-8.1 et seq<\/span>. (the \u201cAct\u201d), grants broad authority to an attorney-in-fact to act on a principal\u2019s behalf. The Act provides: \u201cAll acts done by an attorney-in-fact pursuant to a durable power of attorney during any period when the power of attorney is effective in accordance with its terms, including any period when the principal is under a disability, have the same effect and inure to the benefit of and bind the principal and the principal\u2019s successors in interest as if the principal were competent and not disabled.\u201d N.J.S. 46:2B-8.3. This section purports to state that the acts of the attorney-in-fact are binding upon the principal and the principal\u2019s successors in interest, suggesting that the acts of the attorney-in-fact have the same effect as if the principal had acted himself or herself. While this is true, the law in New Jersey requires more.<\/p>\n New Jersey law imposes a higher duty upon an attorney-in-fact acting on behalf of a principal under a power of attorney. An attorney-in-fact in New Jersey has a fiduciary obligation to the principal and must act \u201cwithin the powers delegated by the power of attorney and solely for the benefit of the principal.<\/strong>\u201d N.J.S. 46:2B-8.13.a [emphasis added]. A common situation in which a power of attorney may expressly authorize an attorney-in-fact to act, but where the act will be prohibited, involves lifetime gifts. While an individual generally has broad power to make lifetime gifts of his or her own property, unfettered by any restrictions or constraints, an attorney-in-fact operating under a power of attorney does not have that same authority. An attorney-in-fact may not use the principal\u2019s resources unilaterally to favor himself or herself in ways that are contrary to the principal\u2019s wishes.<\/p>\n