Is a Power of Attorney Responsible for Debts?

Power of attorney does not make an agent liable for the principal’s debts, explains Neal Frankle for Wealth Pilgrim. However, if agents are irresponsible or fail to heed their principal’s instructions, they may be held liable for any debts that may result, warns Nolo.

The person who gives the power of attorney is known as a principal, grantor or donor, while the receiver is referred to as an agent, according to Frankle. The agent is legally allowed to sign contracts, purchase property, take on debts and accept other obligations on behalf of the principal. However, the principal is ultimately responsible for those obligations.

Under certain circumstances, agents may be held liable for actions undertaken in the course of their duties. They are considered responsible for obligations accepted illegally, negligently or in violation of the power of attorney contract. Agents may also be liable for obligations resulting from signing additional contracts. For instance, an agent who co-signs a loan gains the same legal obligations as the principal he represents. For these reasons, the power of attorney should be exercised with care, warns Frankle.

Relationships such as marriage may make the agent liable for the principal’s debts and other obligations. The power of attorney becomes inoperative once the principal passes away, explains Nolo.