One of the most crucial aspects of estate planning is appointing people you trust to step in for you when you can’t act for your self. Two of the most prominent of these roles are the executor of your estate and your agent with power of attorney. The two roles may be filled by the same person, but they themselves are very different. Knowing the differences between the executor of estate vs. power of attorney can help you make the exact right decisions on who should fill those roles.
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 the probate process. The probate process is the act of filing the deceased’s will with the appropriate probate court, locating and collecting all the assets, paying off all debts associated with the estate 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 the latter person has become incapacitated or is otherwise unable to make her 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 two 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 make their own decisions.
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’re incapacitated or otherwise unable to make your own decisions.
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, whereas an executor’s responsibilities 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. Those responsibilities 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 a trusted relative, such as a child, is chosen for both roles. However, these responsibilities do not overlap — 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 to help ensure your affairs are managed effectively.
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. Choose wisely, as their decisions will not only impact your estate but also have a lasting effect on your family.
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 your family is taken care of when you’re not 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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