In estate and succession planning, the two main documents that form the backbone of this process are wills and powers of attorney. While both serve important purposes, they are completely different documents that serve distinctly different functions, and are utilized in different circumstances. Understanding the differences between them is crucial for comprehensive estate planning and ensuring one’s wishes are carried out effectively.
Most people are familiar with what a will does: it is a legal document that outlines your wishes regarding the distribution of your assets after your death. It allows you to specify who will inherit your property, as well as who will be responsible for carrying out your wishes as the executor of your estate.
The key point is that your will deals with what happens when you die. A power of attorney, on the other hand, deals with your affairs while you’re still alive. A power of attorney is a legal document that grants authority to another person to act on your behalf while you’re still alive, typically meant to deal with situations of mental incapacity or periods of unavailability, such as due to travel.
In some ways, wills are more straightforward. There is only one “type” of will, all wills generally cover the same subject matter (that is, funeral/burial wishes, distribution of your assets to your heirs and guardianship of minor children) and they all “kick in” upon death. Powers of attorney are much more variable, with different types and scopes. For instance, the basic categories are powers of attorney for financial or legal matters (known as a continuing or durable power of attorney) vs. powers of attorneys with respect to personal care and healthcare decisions (known as a power of attorney for personal care). The latter should not be confused with the concept of a living will or healthcare advanced directive, which is a document which more specifically outlines how you want certain decisions to be made with respect to your medical treatment or personal care, as opposed to simply appointing someone to make these decisions for you.
Another way in which powers of attorney can be categorized is general vs. limited or specific. A general power of attorney grants broad authority to the appointed individual to handle a wide range of matters on your behalf. A limited or specific power of attorney grants authority for a specific purpose or for a limited period. For example, you might appoint someone to handle the sale of a property on your behalf while you’re out of the country.
Powers of attorney can also be categorized based on when they start to apply or stop applying. At a basic level, a power of attorney comes into force when it’s signed, and ceases to apply when the person who signed it (known as the “grantor”) becomes incapacitated. However, “springing” power of attorney doesn’t apply when it’s signed, but instead needs to wait for the incapacity to occur before it comes into effect, ensuring the grantor retains control over their own affairs in the meantime. A “durable” or “continuing” power of attorney is one that comes into effect right away, but continues in force when the grantor becomes incapacitated.
In summary, while both a power of attorney and a will play crucial roles in estate planning, they serve different functions and address different aspects of decision-making and asset distribution. By understanding the distinctions between these two legal documents, individuals can create comprehensive estate plans that address both present and future needs, ensuring their wishes are carried out effectively.
