Executor of estate vs power of attorney

A common question I am asked is: What is the difference between having power of attorney and serving as an executor?

Table of Contents Show

How a Power of Attorney Works
What Is an Executor of an Estate?
What Is Power of Attorney?
Executor of Estate vs. Power Of Attorney: How They Differ
Can One Person Be Both an Executor of Estate and Power of Attorney?
Bottom Line
Tips for Planning Your Estate

The difference is literally life and death. The agent serving under your power of attorney only has power and authority to act during your lifetime. Conversely, the executor is a person who is appointed by the probate court to close out your estate when you pass away. The executor only has power to act after your death.

While an agent’s responsibilities and an executor’s responsibilities are similar, their roles are required for opposite times. As soon as you die, your power of Clarksville estate planning attorney is void, and your agent’s authority is terminated. In the same way, your executor has no authority until the moment you die and he or she is appointed by the court to take over your accounts.

How a Power of Attorney Works

At some point in your life, you will not be capable of taking care of your finances and your personal life. If you become physically or mentally incapacitated, you will need someone to help manage your accounts, pay your bills, file your taxes, and make healthcare decisions for you. Unfortunately, a loved one does not always have the legal authority to automatically assume your responsibilities. An individual who wants to help make these decisions must have the property authority to do so. This is where a power of attorney comes into play.

A power of attorney is a document that allows you to appoint someone to make healthcare, financial, and other important decisions for you during your life. Just remember that your agent only has the ability to act during your life, and generally cannot make decisions for you after your death.

When you die, your bank accounts, investments, and personal affairs do not simply disappear. Someone needs to have the legal ability to settle your accounts, file your last tax return, and manage the upkeep of your personal assets. That is the role of the executor.

The executor is nominated by your Last Will and Testament and is appointed by the Court. Their responsibilities include satisfying debts, gathering assets, resolving claims against your estate, and disseminating assets among the beneficiaries of your will.

Remember that while you are living, your executor has no power to act on your behalf. The executor’s is only authorized by the Court to act after your death. Sometimes I am asked whether an executor can take action on behalf of a person while they are still alive. The answer is always no. That is the job for the person you appoint as your agent under your power of attorney. Often times, your executor and your agent are the same person, but that person still must act in the proper capacity.

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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 them can help you make the exact right decisions on who should fill those roles.

Do you have questions about estate planning? Speak 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 most salient difference between the executor and the agent is when the two roles take effect. Power of attorney is relevant to situations in which you are alive but unable to make your own decisions. Your executor’s duties begin only after you have died.

Additionally, the job description for each role is slightly different, even though both deal with managing your affairs when you can’t. Your executor has a very specific and limited job to do: Making sure there’s enough money in your estate to pay off any debts and then channeling the rest to your heirs. Your agent, on the other hand, is more wide-ranging in their duties. The job could involve ruling on all kinds of decisions – financial, legal and medical – depending on what aspects of your life you’ve granted power of attorney over.

Can One Person Be Both an Executor of Estate and Power of Attorney?

One person can serve as both your agent and the executor of your will. This is not uncommon, especially if you’ve chosen a child or other trusted relative for the roles. The two roles won’t overlap. Power of attorney is only effective while you’re alive and executors only assume responsibilities once you pass away.

However, you should keep in mind that these are both big jobs with a lot of responsibility. Appointing the same person to both roles may be asking a lot of him or her. If you find that you’re struggling to think of people to appoint, you may want to consider looking for an estate planning attorney.

Bottom Line

Your power of attorney agent and executor will play key roles in taking care of your affairs at the end of your life and beyond. Consequently, it’s paramount that you choose people who you trust and believe to be highly competent. Additionally, make these choices very carefully, as these people will also have a large effect on your family after you’re gone.

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 up to three financial advisors who serve your area, and 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.

Hunter Kuffel, CEPF® Hunter Kuffel is a personal finance writer with expertise in savings, retirement and investing. Hunter is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He graduated from the University of Notre Dame and currently lives in New York City.