Executer vs. Power of Attorney: What’s the difference?
When it comes to estate planning, appointing the right people you value and trust is crucial. After all, these individuals would become responsible for making decisions on your behalf. And this is where the discourse around executor vs. power of attorney comes into play. In estate planning, the two most important roles are the power of attorney and the estate executor.
Oftentimes, the difference between the executor and power of attorney puzzles people. Interestingly, the same person can assume both roles, but the nature and responsibilities of each role are different. And knowing the main differences between the two allows estate planners to make the right decisions.
What is an estate executor?
The estate executor refers to an individual responsible for executing the will of the deceased. Often, the executor operates as an “Executrix” or “personal representative.” Mostly, the executor distributes assets to one or multiple beneficiaries as per the deceased’s wishes. The executor is also responsible for carrying out tasks like paying off creditors, filing last tax returns, and issuing death notices to close the deceased’s affairs.
What is Power of Attorney?
POA or power of attorney is a direct legal authorization to a specific person to act on behalf of someone else. In layman’s terms, POA carries out orders on the principal’s behalf. POA document gives an attorney or an agent the legal power to carry out the wishes of the principal.
Difference between the executor and Power of Attorney document
On a fundamental level, the job of an executor is to act in the best interest of an estate after the principal’s death. The executor pays final taxes and distributes assets to stated beneficiaries.
On the other hand, a power of attorney works as a legal authority that grants someone the power to act on their behalf while they’re still alive. In most cases, when people are unable to handle their affairs, they use POA documents to give someone authority.
The basic difference between the executor and an agent with POA is that one individual represents the principal while he’s alive. Now, the other deals with the estate affairs of a deceased person after their departure. It means the executor and agent with POA don’t intersect.
But as mentioned earlier, a single person can undertake the responsibilities and roles. But this puts a lot of pressure on the assigned individual and may make estate affairs more complex. Most people opt for a dedicated estate planning professional to act as their executor or agent.
The role of an executor boils down to whether or not the deceased’s estate planning is in order. Usually, an executor represents the deceased’s estate for the probate process, fulfills the responsibilities related to the probate court process, and executes the will.
These responsibilities can include:
- Filing for a petition to start the probate process using the decedent’s death certificate.
- Taking care of financial affairs like covering outstanding debts and finalizing the tax report.
- Consolidating the deceased’s assets to figure out the overall worth of the deceased’s estate.
- Spotting and panning the entire estate of the deceased and bring into the fold with their will.
- Executing the will of the deceased and distributing ownership assets, investments, royalties, and business interests after probate.
- Managing deceased’s properties and fixed assets like land, vehicles, and homes.
Power of Attorney
Power of attorney falls into categorical financial or healthcare decisions, and both POAs give the attorney limited powers. But the authority of an agent can be limited or broad to make financial, estate, or medical power decisions on the principal’s behalf.
The main responsibilities and mechanics of a power of attorney include the following:
- Springing power of attorney becomes effective only when you’re physically and mentally unable to take care of your affairs.
- POA document gives power to the person to act on the principal’s behalf with specific limits and capabilities.
Executor and Power of Attorney: What’s more important?
Both POA with an assigned agent and the executor are important in their own right. And that’s because both jobs come with their own set of responsibilities. You may not need a power of attorney agent, but it helps to know that someone out there is responsible for your finances and health decisions.
For instance, if you’re incapacitated in a hospital and cannot make your own decisions, you won’t have to worry about paying your mortgage and utility bills and make other important care decisions. Contrarily, it is a matter of “when” rather than “if” of needing an executor.
Once you depart from the mortal world, your selected executor takes care of estate affairs as per your will. In retrospect, both the executor and POA agent are important and play a key role in different stages of life and death.
Can a Power of Attorney act on behalf of an executor?
No – a thin red line separates the roles of an executor and an attorney. It is crucial to understand that in the event of your death, the job of an attorney ceases to exist.
At this stage, your estate and valuable personal assets are yours, but it triggers the role of an executor to care out your wishes stated in your will.
But if you choose the same person to be your executor and the attorney – then it would propel that person to fulfill the role of an attorney and then move on to become an executor after your death.
Do you need both executor and Power of Attorney?
While the same individual can perform both roles, it is not advisable to rely on a single person to carry out the job of an attorney and an executor. Typically, the attributes and skills you need to choose someone are not so different from each other.
But the responsible thing would be to opt for someone intuitive, detailed-oriented, and organized to take care of responsibilities as an attorney and executor.
You might think of choosing a family member, but understand that hiring the same person to assume both jobs would be unusual and impractical. Although there is no overlap between both jobs, it creates an added burden of responsibility for a single person. After all, both jobs come with many responsibilities and duties.
If you’re wondering whether or not a power of attorney can override your will – the answer is no. In fact, there are strict laws that prevent an attorney from benefiting from a vulnerable situation. As per legal rules, people can hold an attorney liable if there is a failure to carry out the principal’s wishes or inconsistency in the documents.
Contrary to naïve misconception, you cannot expect your attorney to draft a will or make changes in the existing will on your behalf. Similarly, an attorney cannot pass on the responsibilities to someone else or exploit a life insurance policy.
Planning for the inevitable days is a wise course of action. Once you’re gone – you want a professional individual to authorize financial and legal decisions at your behest.
If you want to secure your estate, choosing the person who can undertake the responsibilities of a power of attorney and the executor is vital. You can choose a professional estate planning attorney to get the best service.
You may not realize it now, but the difference between the two is quite significant. In the event of your departure, you need an experienced, reliable, and calm person to handle your estate affairs.
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