Psst … A Power of Attorney (POA) Is Not an Estate Plan. Here’s Why.
As I sat across the table from a friend, they remarked to me that they weren’t concerned about their elderly parent’s estate planning needs. After all, they had legal and financial Power of Attorney for their parent.
There was only one problem with that assertion. A power of attorney only works when someone is alive. It literally ceases to have any authority upon someone’s death.
While a power of attorney (or a POA) legally entitles you to make decisions on behalf of someone if needed, it is vital to understand that a power of attorney is not viable after death – that’s why it’s important to have a complete estate plan in place.
What is a durable power of attorney?
A durable power of attorney is a legal document that grants authority to the designated person to make legal decisions on your behalf. While a general power of attorney ends at death or incapacitation, a durable POA remains effective even if you are incapacitated. But, understand that it too ends upon death. Power of attorney can include important decisions about healthcare, finances, and legal issues – but you will have no decision-making authority when the beneficiary passes away.
The power of attorney can be made effective upon signing, but it only takes effect when the principal is unable to make decisions for themselves. Every situation and family dynamic is different, and it’s easy to adjust your power of attorney to fit your lifestyle with the help of an estate planner. The powers of attorney can be limited in certain circumstances or extended in others, depending on your specific needs.
Why is power of attorney not viable after death?
Since a power of attorney grants the agent the authority to manage the principal’s financial or healthcare affairs while they are alive, the legal agreement is automatically terminated at death. Power of attorney is not viable after death because a deceased person can’t legally hold assets or own property. So, there’s nothing for the agent to hold power of attorney over. Since all assets are in the control of the estate after death, most financial and legal decisions are made by the executor or administrator of the estate, as in the probate process. If the power of attorney disagrees with the decisions of the executor of the estate, they may have to challenge them in court.
What a POA does not allow
An authorized agent of your General or Durable Power of Attorney is able to make a lot of decisions on your behalf. However, there are some items they are NOT authorized to make, such as:
- Write or make changes to your Last Will & Testament
- Vote in public elections on your behalf, or in your name
- Or have any authority upon your death as stated previously
Estate planning options to avoid probate
Revocable trust
A revocable living trust concerns not only the principal’s possible incapacitation but what happens during their lifetime as well as after their death. Much like a trust is created to legally hold assets, a revocable trust acts as an empty vessel until ownership of assets is transferred or the trust is “funded.” Revocable trusts have many benefits, including reserving the right to modify or revoke. This means that the trust maker can reclaim assets from the trust, change beneficiaries, sell property, etc. Many people prefer revocable trusts because it allows the trust maker to have final complete control.
Will
In Arizona, the estate is required to go through the probate process when it is worth more than $75,000. When the estate is estimated at less, appointed beneficiaries can claim their inheritance without going through probate by filing a Small Estate Affidavit. This ensures that the provisions of the will are adhered to. But without an affidavit from the court, the will must be probated even if the estate doesn’t have to be. If you live in the greater Phoenix area, including Glendale, Scottsdale, Mesa, Gilbert, Chandler, Tempe, Fountain Hills, Queen Creek, Chandler Heights, Sun Lakes, Peoria, and Paradise Valley, make sure your assets and your intentions are protected with the expert estate planning at Evergreen.
Talk to one of Evergreen’s experienced estate planners in Mesa, AZ
Don’t leave your most valuable assets to Arizona intestate succession laws! It’s important to realize that power of attorney ceases after death, and the appointed agent will no longer be able to make legal decisions for the deceased and their estate. If you don’t have a revocable living trust or will, your assets will be distributed according to intestate succession, which refers to your closest relatives.
Intestacy can be confusing and probate can be intimidating. Talk to one of Evergreen’s experienced estate planners to ensure that your loved ones are taken care of and every detail is addressed. A popular choice in estate planning is a revocable trust, which allows you to retain control over your finances, avoid probate, and plan for the future. Many opt to have their revocable trust turn into an irrevocable trust upon death so that the beneficiaries have asset protection. It’s a good idea to have an estate planner review your durable power of attorney and explore more the benefits of a revocable living trust.
Common questions about power of attorney in Arizona
Do I need a POA if I have a living trust?
Yes. The living trust grants your trustee the right to manage assets in the trust, but only a durable power of attorney grants your agent the power to manage assets that are not in the trust.
Does a living trust replace a will?
No, a living trust does not replace a will. Because they serve different purposes, a complete estate plan requires both a will and a trust. While a will goes into effect only after death, a trust goes into effect as soon as it is created.
