Power of attorney is one of the most important legal forms for estate and elder care planning. Along with wills and trust documents, it is a critical document for arranging one’s affairs. A power of attorney cannot change a properly written will. However, such a person can make many changes to the assets surrounding that estate. Here is how it works. Estate planning can get complicated, quickly; working with a financial advisor goes a long way to simplifying the challenge. Estate planning can get complicated, but working with a financial advisor is one of the best ways to clarify and even simplify the challenge.
What Is Power of Attorney?
Power of attorney is when you assign someone the authority to make legally binding decisions on your behalf. This can mean managing financial assets, making choices regarding medical care, signing contracts and other commitments. A power of attorney can access confidential materials and their decisions are as binding as if you had made them yourself.
Most of the time power of attorney is a limited grant of authority. That is to say, you will give someone power of attorney to do specific things or to act within a specific scope. For example, the IRS ordinarily would not accept taxes filed by a third party; you must file your taxes yourself. However, assigning power of attorney to your tax preparer gives that person the authority to file your taxes as though you had done so yourself. This is a common practice and lets the tax preparer see a client’s confidential IRS and bank records, as well as filing taxes on the client’s behalf. Such power, however, doesn’t allow them to sign contracts in your name or sell your car. Their authority is limited to reviewing your finances and filing documents with the IRS.
In some cases you may assign what’s known as general power of attorney. This is one of three types of durable power of attorney (the other two are special power of attorney and healthcare or medical power of attorney). With a general power of attorney, the person can make just about any decisions at all on your behalf while the power of attorney assignment remains valid. People will often make a general assignment to a trusted family member or long-time friend if they are going to be unreachable or incapacitated.
Power of Attorney Cannot Change a Will
Readers should note that issues such as power of attorney and estate law are highly specific to each state. While this article can give you an overview of the subject, it should not be taken as individual legal or financial advice. Everything below applies to most jurisdictions, but readers should understand that any or all of these concepts can change from state to state. Seek an attorney before making any decisions regarding your own affairs.
Writing a valid will is easier than most people believe. The only legal requirement is that you be of sound mind when you make your dispositions, meaning that you are legally competent to make decisions, and that the will must be written down.
In most, if not all, states a will doesn’t need to be written by an attorney, notarized or witnessed. There are no specific forms that a will has to take. While all of these things can help make it more likely that your wishes will be enforced and enforceable, they aren’t necessary.
So long as a will is valid, a power of attorney cannot change it or rewrite it. This is not within their scope of authority even if the grantee specifically says otherwise in their power of attorney assignment. Any will written by a power of attorney is invalid on its face.
If a will is invalid, a power of attorney can challenge it and show cause as to why the will should not be enforced, in whole or in part. As a general rule, to challenge a will you must show that the individual was not in their right mind, competent to make their own decisions, or otherwise in a position to take legally binding action. (As an extreme example, someone with a gun to their head would be mentally competent to amend their will but those changes still would be invalid. This would be known as “duress.”) However, this would be rare, since in most cases someone needs to be dead before anyone can challenge the validity of that peron’s will.
In most states power of attorney ends once the grantee dies. At that point the individual’s legal rights transfer to their estate. The executor of the estate takes over and manages all of the deceased’s affairs from there. The result is that power of attorney cannot change a will while the grantee is alive, because they do not have the authority to do so, and cannot change an estate once the grantee has died because their role as power of attorney ends with the grantee’s death.
But Power of Attorney Can Still Affect an Estate
However, it’s important to understand that someone with general power of attorney can still change the circumstances surrounding a will. Specifically, they can make changes to your estate, essentially, before it becomes your estate. While it has limitations, general power of attorney is a sweeping grant of authority. They can make significant financial decisions on your behalf, which means that they can often restructure your personal finances according to their own best judgment. This can functionally invalidate sections of your will if the power of attorney dissolves or changes assets that you had assigned to various heirs.
For example, say you write a will which gives all of your investments to Sam and all of your cash holdings to Sally. You then make Sally your power of attorney. During your last years, Sally liquidates all of your investments, saying that she wants the cash to take care of you and pay for any expenses. Whatever her intentions, Sally has rearranged your estate in function if not in form. She will now get everything and Sam nothing, because all of your assets are in cash and there are no investments left for Sam to inherit.
This does not always require bad faith and unfair dealing, although that can happen, too. Someone with your power of attorney may restructure your assets out of a sincere belief in your best interests, not realizing that they may blow up your estate planning in the process. As a result, if you include a general power of attorney as part of your elder care plan it is essential to discuss your estate wishes with them in advance.
In a Nutshell
Someone with your power of attorney cannot change your will, nor can someone write one on your behalf. However, that person can change your assets to shift how your will works in practice, so be certain to speak with your power of attorney about your wishes before making any assignments.
Estate Planning Tips
- When it comes time to make an estate plan, a lot of moving pieces can come into play. How do you want to divide up your assets? What do you think you will have? Who will need taking care of, and who will you want in charge of it all? With SmartAsset’s matching tool you can find a financial advisor in your area to help talk all of this through. If you’re ready, get started now.
- Whether you’re a grantee, someone with power of attorney or an executor, it’s important to understand what’s in the nest egg. Using a free retirement calculator is a good way to get a quick estimate of that.
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