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One of the most crucial aspects of estate planning is appointing people you trust to step in when you can’t act for yourself. Two of the most prominent of these roles are the executor of your estate and your agent with power of attorney. While the same person can serve as both, these two roles have very different purposes. Knowing the differences between the executor of estate vs. power of attorney can help you make the right decisions when deciding who to appoint.
If you have questions about estate planning, consider consulting with a financial advisor today.
What Is an Executor of an Estate?
The executor of an estate is the person in charge of managing the estate throughout probate. This process entails filing the deceased’s will with the appropriate probate court, locating and collecting all of the estate’s assets, paying off any debts the estate has and distributing what’s left to the proper beneficiaries.
The executor must have strong organization skills and attention to detail. Shepherding an estate through probate involves a good deal of appraisal and decision-making, as well as a lot of paperwork.
What Is Power of Attorney?
Power of attorney is a legal document that gives an individual the authority to make decisions on behalf of someone else, often when they become incapacitated or otherwise unable to make their own decisions. Someone with power of attorney is often referred to as the agent.
There are a few different kinds of power of attorney. The two most common varieties are general power of attorney and medical power of attorney. General power of attorney gives an agent the power to make a wide range of decisions on financial matters, business transactions, retirement accounts and more. Medical power of attorney is more narrow. An agent with medical power of attorney can make decisions about the health care of someone who a doctor has deemed unfit to do so themselves.
Power of attorney can be either durable or springing. If you sign a document giving durable power of attorney, your agent can immediately start making decisions on your behalf. With springing power of attorney, your agent will assume authority only once certain conditions occur. Most frequently, this condition is if a doctor concludes that you are unable to make your own decisions, often due to incapacitation.
Executor of Estate vs. Power Of Attorney: How They Differ
The key difference between an executor and an agent under power of attorney is when their authority takes effect. A power of attorney applies while you are alive but unable to make decisions for yourself. An executor’s responsibilities, on the other hand, begin only after your death.
Beyond timing, the roles also differ in scope. An executor has a specific and limited duty: ensuring your estate has enough funds to settle debts and then distributing the remaining assets to your heirs. In contrast, an agent under power of attorney has broader responsibilities. This can include making financial, legal and medical decisions on your behalf, depending on the authority you’ve granted them.
Can One Person Be Both an Executor of Estate and Power of Attorney?
One person can serve as both your agent under a power of attorney and the executor of your will. This arrangement is fairly common, especially when someone selects a trusted relative, such as a child, for both roles. However, these responsibilities do not overlap, as power of attorney is only valid during your lifetime, while an executor’s duties begin after your passing.
That said, both roles come with significant responsibilities. Assigning the same person to both positions can be a heavy burden. If you’re having difficulty selecting the right individuals, you might consider consulting an estate planning attorney.
What Can an Executor and Power of Attorney Actually Do?
An executor and an agent with power of attorney may handle some of the same assets, but their authority applies at different times. An agent with financial power of attorney may be able to pay bills, manage investments, access certain bank accounts or handle real estate transactions while you’re alive, depending on the powers granted. That authority generally ends when you die.
An executor’s role, in contrast, begins after death and generally covers property that becomes part of your probate estate. Becoming an executor doesn’t give someone control over everything the deceased person owned, though. Assets with named beneficiaries, such as IRAs and life insurance policies, generally pass directly to those beneficiaries rather than through probate. Property held in a trust is generally controlled by the trustee, while jointly owned property may pass to a surviving owner, depending on how the property is titled and state law.
| Financial Matter | Power of Attorney Agent | Executor |
|---|---|---|
| Pay bills | During your lifetime, if authorized | After death, for estate expenses |
| Manage bank accounts | During your lifetime, if authorized | After death, for accounts held by the estate |
| Manage investments | During your lifetime, if authorized | After death, for investments held by the estate |
| Sell real estate | During your lifetime, if authorized | After death, if the property is part of the estate and the executor has authority to sell it |
| Make healthcare decisions | If granted appropriate healthcare authority | No |
| Pay estate debts | No authority after death | Generally responsible for valid estate debts |
| Distribute estate assets | No | Yes, according to the will and applicable law |
These differences can help you decide whether the same person should serve in both roles. Someone who is capable of managing your finances during an illness or in case of incapacity may not necessarily be the best choice to handle probate, creditor claims and distributions to beneficiaries. Choosing each person based on on the responsibilities they may actually face can help ensure that both roles are handled appropriately.
Bottom Line
Your power of attorney agent and executor hold crucial responsibilities in managing your affairs, both at the end of your life and after you’re gone. Therefore, it’s essential to select individuals you trust and consider highly capable to serve in these roles. Choose wisely, as their decisions will not only impact your estate but also have a lasting effect on your heirs.
Tips for Planning Your Estate
- Before you start thinking about estate planning, it’s a good idea to put together a financial plan. This can help ensure you continue to take care of your family when you’re no longer around. A financial advisor can build and maintain a financial plan that meets your needs. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area. You can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Your agent may have to make decisions about your 401(k) account. Find out how much money you’ll have in your account by the time you retire with our free 401(k) calculator.
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