dTwo of the most important legal documents in estate planning are a power of attorney (POA) and a will. While both documents deal with the management of your affairs, they serve different purposes and have distinct legal implications.
We'll explore the key distinctions between these two documents, including their legal authority and how they interact with each other. We'll also discuss how Trustworthy can help you securely store and manage these essential documents.
Key Takeaways
A power of attorney grants legal authority to an agent to act on your behalf during your lifetime, while a will takes effect after your death.
A will distributes your assets and property to your beneficiaries after you pass away, whereas a POA allows your agent to manage your affairs while you are alive.
In most cases, a will does not override a power of attorney, as they serve different purposes and operate during different time frames.
Two of the most important legal documents in estate planning are a power of attorney (POA) and a will. While both documents deal with the management of your affairs, they serve different purposes and have distinct legal implications.
We'll explore the key distinctions between these two documents, including their legal authority and how they interact with each other. We'll also discuss how Trustworthy can help you securely store and manage these essential documents.
Power of Attorney vs. Will
A common question when discussing powers of attorney and wills is whether a will can override a POA. In most cases, the answer is no, as these two documents serve different purposes and operate within different time frames.
Ben Michael, an attorney at Michael & Associates in Dallas, explains:
"The most obvious difference between power of attorney and a will is the status of the individual. A power of attorney is used to handle a person's assets while they're still alive.
"In the case of someone who either lacks the mental capacity to handle their own assets or is physically incapacitated, then power of attorney can be assigned to a capable individual. This person can make decisions, mostly financial, for the person in need.”
In regard to a will, he continues:
“A will, on the other hand, is basically written instructions on how to handle the assets left after a person dies. The executor of the will is responsible for paying off debts and dividing any assets left according to the wishes of the deceased."
Understanding the Purpose of a Power of Attorney
A power of attorney is a legal document granting authority to another person (known as an agent or attorney-in-fact) to act on your behalf in financial, legal, or medical matters. The primary purpose of a POA is to ensure your affairs are managed if you become incapacitated or unable to make decisions for yourself.
There are several types of powers of attorney, each designed to serve a specific purpose:
General Power of Attorney
A general power of attorney is a legal document granting broad authority to your chosen agent to handle your financial and legal affairs on your behalf. This type of POA is typically used for a limited period or for a specific transaction, such as closing a real estate deal or managing your affairs while you are traveling or temporarily unavailable.
With a general POA, your agent can perform a wide range of tasks, including:
Accessing and managing your bank accounts
Paying your bills and handling your taxes
Buying, selling, or managing your real estate properties
Investing your money and managing your investment accounts
Entering into contracts and signing legal documents on your behalf
Handling your insurance matters and filing claims
Collecting debts owed to you and settling any outstanding debts you may have
Durable Power of Attorney
A durable power of attorney (DPOA) is a type of POA that remains in effect even if you become incapacitated. This means your chosen agent can continue to manage your financial and legal affairs on your behalf, even if you are no longer able to make decisions for yourself.
A DPOA can be an essential component of your estate plan. It ensures your affairs will be handled according to your wishes.
Medical Power of Attorney
A medical power of attorney (also known as a healthcare power of attorney or advance directive) is a legal document giving your chosen agent the authority to make healthcare decisions on your behalf if you can’t. This can be an important tool for ensuring your medical wishes are respected and you receive the care you want in the event of a serious illness or injury.
With a medical POA, your agent can:
Make decisions about your medical treatment, including consenting to or refusing procedures, medications, or surgeries
Access your medical records and communicate with your healthcare providers
Decide on your living arrangements, such as admitting you to a hospital or nursing home
Enforce your wishes regarding life-sustaining treatments, as outlined in your living will or advance directive
Springing Power of Attorney
A springing power of attorney is a type of POA that only takes effect upon a specific event or condition, such as your incapacitation. This means your chosen agent does not have any authority to act on your behalf until the event occurs and your incapacitation is confirmed, typically by one or more physicians.
A springing POA provides an extra layer of protection and control over your affairs. By specifying that your agent's authority only begins upon your incapacitation, you can ensure they do not have access to your assets or decision-making power until it’s absolutely necessary.
Understanding the Purpose of a Will
A will, also known as a last will and testament, is a legal document specifying how your assets and property should be distributed after your death. The primary purpose of a will is to ensure your final wishes are carried out and your beneficiaries receive the inheritance you intend for them.
In addition to distributing your assets, a will can also be used to:
Name an executor. The person responsible for managing your estate and carrying out the instructions in your will.
Appoint guardians. If you have minor children, you can use your will to nominate guardians to care for them after your death.
Establish trusts. You can create testamentary trusts in your will to provide for beneficiaries who may be minors, have special needs, or require financial management assistance.
Specify final arrangements. Your will can include instructions for your funeral, burial, or cremation preferences.
A will becomes effective only after your death, at which point your executor will initiate the probate process to distribute your assets according to your wishes.
Can a Will and POA Conflict?
A power of attorney is designed to manage your affairs while you’re alive, particularly if you become incapacitated. The authority granted by a POA ends upon your death. On the other hand, a will takes effect only after your death and is used to distribute your assets to your beneficiaries.
However, there are some situations in which a will and a POA may interact or potentially conflict:
Revocation of a POA
While it’s possible for a new will to revoke a previously executed power of attorney, this is not a common practice and is generally not recommended. A will and a POA serve different purposes and operate during different time frames, so using a will to revoke a POA can create confusion and potential legal issues.
If you wish to revoke a previously executed POA, it’s best to do so through a separate, written revocation document. This document should clearly state that you are revoking the previous POA and should be signed and dated by you. It's also a good idea to notify your agent and any relevant third parties, such as banks or healthcare providers, of the revocation to ensure that they are aware of the change.
Using a will to revoke a POA can create problems, as the will may not take effect until after your death, leaving a gap in the management of your affairs. Additionally, if there are conflicting instructions between your will and POA, it can create confusion and legal challenges for your loved ones.
Conflicting Instructions
If your will and power of attorney contain conflicting instructions, it can create significant confusion and legal issues for your agent and loved ones. This is why it's important to ensure your estate planning documents are consistent and work together harmoniously.
For example, let's say your POA grants your agent the authority to sell your real estate properties if needed to pay for your medical expenses. However, your will specifically bequeaths one of your properties to a particular beneficiary. If your agent sells the property under the POA, it could create a conflict with the instructions in your will and lead to legal challenges from the intended beneficiary.
To avoid conflicts, work with an experienced estate planning attorney to create a comprehensive and consistent set of documents. Your attorney can help you ensure that your POA, will, living will, and other estate planning tools all work together to achieve your goals and protect your interests.
Using a secure system like Trustworthy to keep your documents organized is also recommended. Trustworthy is a secure online platform that can help you store, share, and manage your power of attorney, will, and other essential estate planning documents. With Trustworthy, you can:
Upload and store your documents in a secure, encrypted digital vault
Share your documents with your agent, executor, beneficiaries, and trusted advisors
Set custom access permissions and revoke access as needed
Receive reminders to review and update your documents regularly
Access your documents anytime, anywhere, from any device
Challenges to a POA
If a beneficiary or family member believes your agent has misused their authority under a power of attorney, they may choose to challenge the validity of the document during the probate process. This can create legal issues and delays in the administration of your estate.
There are several grounds on which a POA may be challenged, including:
Lack of capacity. If the person granting the POA (the principal) was not of sound mind or did not have the legal capacity to execute the document, it may be challenged as invalid.
Undue influence. If the agent or another party exerted undue influence or coercion on the principal to execute the POA, it may be challenged on the grounds of improper execution.
Fraud or forgery. If the POA was obtained through fraudulent means or if the principal's signature was forged, it may be challenged as invalid.
Abuse of authority. If the agent misused their authority under the POA, such as making decisions that went against the principal's wishes, the POA may be challenged on the grounds of abuse.
If a POA is challenged during the probate process, the court may look to the principal's will for guidance on their intentions and wishes. If the will contains clear instructions contradicting the actions taken by the agent under the POA, it may support the challenge and lead to the invalidation of the POA.
The Importance of Having Both a Power of Attorney and a Will
By having both documents in place, you can ensure your affairs are managed according to your wishes, both during your lifetime and after your death.
A well-drafted power of attorney can provide peace of mind, knowing someone you trust will be able to handle your financial, legal, and medical matters if you become incapacitated. This can be especially important if you have complex assets or ongoing healthcare needs requiring management.
Similarly, a properly executed will ensures your assets will be distributed to your chosen beneficiaries after your death, minimizing the risk of family disputes and legal challenges. A will also allows you to make important decisions, such as appointing guardians for your minor children and specifying your final arrangements.
By using Trustworthy to manage your estate planning documents, you can have peace of mind knowing that your sensitive information is protected and easily accessible to those who need it.
Frequently Asked Questions
How can an estate planning attorney help me create a comprehensive plan that includes a power of attorney and will?
An experienced estate planning attorney can help you create a comprehensive plan. This includes a well-drafted power of attorney and will, ensuring that your documents are legally valid, consistent, and reflective of your unique wishes and circumstances. They can also help you navigate complex situations, such as conflicting instructions or challenges to your documents, and provide guidance on how to best protect your interests and those of your loved ones.
What should I do if I suspect my agent is misusing their authority under a power of attorney?
If you suspect your agent is misusing their authority under a POA, you should revoke the POA immediately and notify relevant third parties, such as banks and healthcare providers, of the change. You may also need to take legal action to protect your interests and recover any misused assets. It's important to work with an experienced attorney to guide you through the process and ensure your rights are protected.
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