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How to determine a compensation of the attorney-in-fact in the absence of principal’s direction?

How to determine a compensation of the attorney-in-fact in the absence of principal’s direction?

Full question:

I am an attorney-in-fact in the power of attorney of my uncle’s business. I wanna know whether my uncle can fix compensation to me. What will happen if there is no direction from my uncle for my compensation?

Category: Power of Attorney
Date: 04/07/2025
State: New Jersey

Answer:

In New Jersey, a principal can direct the ways in which an attorney-in-fact is to be compensated in a power of attorney or in a separate written agreement dealing with compensation. If there is no such direction from the principal, a court of competent jurisdiction may award reasonable compensation to the attorney-in-fact upon appropriate application. Compensation of the attorney-in-fact is envisaged in N.J. Stat. § 46:2B-8.12 which reads as:

“A principal shall have the power to direct whether an attorney-in-fact is to be compensated in a power of attorney or in a separate written agreement dealing with compensation. A principal may direct that an attorney-in-fact be compensated and may provide for the method by which compensation shall be calculated and when compensation shall be paid. In the absence of any such direction and upon appropriate application, a court of competent jurisdiction may award reasonable compensation to the attorney-in-fact.”

In the instant case, your uncle can direct the ways for your compensation in a power of attorney or in a separate written agreement dealing with compensation. If there is no direction from your uncle for compensation, you can apply for compensation in a court of competent jurisdiction. The court may award reasonable compensation.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What is an example of abuse of a power of attorney?

An example of abuse of a power of attorney occurs when the attorney-in-fact uses their authority to benefit themselves rather than the principal. For instance, if an attorney-in-fact sells the principal's property without their consent and keeps the proceeds, this is considered abuse. Such actions can lead to legal consequences, including potential criminal charges and civil liability.

What is considered reasonable compensation for a power of attorney?

Reasonable compensation for a power of attorney varies based on the complexity of the tasks performed and the time spent managing the principal's affairs. In New Jersey, if no compensation is specified, a court may determine what is reasonable based on the nature of the services provided. Factors include the attorney-in-fact's experience and the customary rates for similar services.

What three decisions cannot be made by a legal power of attorney?

A legal power of attorney typically cannot make decisions regarding the principal's will, change beneficiary designations on life insurance policies, or make healthcare decisions if a separate healthcare proxy is designated. These limitations ensure that certain personal and sensitive decisions remain under the principal's control or are handled by designated individuals.

What are the disadvantages of being a power of attorney?

Being a power of attorney can involve significant responsibilities and potential liabilities. The attorney-in-fact must act in the best interest of the principal, which can lead to stress and time commitment. Additionally, if they mismanage the principal's affairs, they may face legal repercussions, including financial liability for any losses incurred by the principal.

Does power of attorney make you financially liable?

A power of attorney does not automatically make the attorney-in-fact financially liable for the principal's debts. However, if the attorney-in-fact acts negligently or unlawfully, they could be held liable for any resulting financial losses. It is crucial for the attorney-in-fact to act in the principal's best interests and adhere to their authority to avoid liability.

What is a POA not allowed to do?

A power of attorney (POA) is not allowed to make decisions that exceed the authority granted by the principal. This includes making decisions about the principal's will, changing beneficiary designations, or making healthcare decisions if a healthcare proxy is in place. Additionally, a POA cannot engage in self-dealing or act against the principal's best interests.