It’s wise to construct a will and power of attorney as part of your real estate plan, and they often compliment one another. Read below to learn more.
When approaching an estate planning professional on developing a document to detail the distribution of your wealth after death, you ask for a will. When approaching an estate planning professional on the matter of assigning representatives to take on financial and healthcare responsibilities in the event of your incapacity, but not death, you ask for a power of attorney.
These two documents play essential roles in a more comprehensive estate plan built to account for the unexpected and provide critical contingencies for the long-term financial health of your loved ones.
Wills and powers of attorney complement each other very well, serving as either concrete or abstract instructions and legal representations of your wishes and thoughts in your absence, whether temporary or permanent. In both cases, it’s wise to construct a will or a power of attorney while keeping the rest of your estate plan in mind as well.
What is a Last Will and Testament?
A last will and testament is named such because there is only ever one that is valid – the last one. Wills come in different shapes and forms, and there are state rules for what does and does not constitute a will.
For a will to be valid, it must, under most circumstances, be witnessed by people other than the grantor and their beneficiaries, and it must be notarized. There are unique circumstances under which a will may not have to be witnessed – such as when a will is handwritten and signed or when a will was hastily made under dire circumstances, such as a soldier’s last wishes on the battlefield.
Wills can be superseded and amended with time. No estate plan should be set in stone decades before death – unless you’re confident, in your last hour, that you still feel the same way about each and every estate planning decision as you did all those years ago. Life is subject to change at every turn, and so should your estate plan, including your last will.
Overall, wills are created to offer guidance as to how you wish to distribute your probatable estate.
Some assets cannot be distributed via a will – such as assets and accounts already assigned a designated beneficiary, life insurance pay-outs, and retirement account remainders – and there are distinct limitations to what a will can and cannot do. For example, you can name a guardian for your minor child, and you cannot control how or when a specific asset will be distributed to the beneficiary of your choice.
Certain will elements may be taken as a suggestion rather than binding (such as your preferred funerary arrangements). Other estate planning documents may supersede your will if you aren’t careful (assets held in a trust cannot be distributed by a will, for example).
This is part of why it’s crucial to coordinate with an estate planning professional to ensure that every step of your estate plan comes together coherently – especially after a crucial amendment.
How Do Wills Work?
Once you pass away, your attorney or a relative must file a petition for probate with a copy of your death certificate and begin the process of validating and executing your will in court.
This involves notifying potential creditors, calling in beneficiaries, ascertaining the estate’s value, managing the inventory of the estate, coordinating with courts in other states if you owned assets in multiple regions, and ultimately overseeing the distribution of assets.
The person in charge of doing all this is the executor, a position assigned by the court early on in the probate process, usually to the decedent’s attorney or a relative they named in their will.
A last will and testament is not to be confused with a living will. The latter is an advance directive, a document written to outline your consent or lack thereof regarding specific medical procedures and circumstances, should they arise while you are incapacitated.
Dying without a will or a testament is called dying intestate. There are state-specific intestacy laws, including intestate succession laws, dictating how an estate is distributed if no estate plan exists.
What is a Power of Attorney?
A power of attorney is a flexible document granting a person or multiple persons (called “agents”) certain rights and responsibilities in the name of the creator of the document (the principal). These agents have a fiduciary duty to the principal, meaning that while they can act in their name, their actions must be in the principal’s best interests.
Powers of attorney can be written to provide wholesale privileges to act in the person’s name or be limited to a single aspect of the person’s life, down to a single transaction (such as purchasing a home). Most power of attorney documents are not valid once the principal is incapacitated, and however, that is why durable power of attorney documents exist. These include a clause that allows the agent to act in the principal’s interests while the latter is incapacitated.
The principal can revoke a power of attorney at any time but revoking a durable power of attorney while the principal is incapacitated is much more challenging. The family of the principal would have to take the agent to court and argue before a judge that they misused their power to get it revoked. Therefore, it is especially important to choose someone trusted when assigning an agent for a durable power of attorney.
Durable powers of attorney can be beneficial for ensuring that your finances continue to be well-managed in your absence and that your healthcare decisions are made by someone you trust and love. For example, if you are unmarried, you can use a durable power of attorney to grant your partner the right to make critical healthcare decisions for you if you become comatose.
Will and Power of Attorney: Representing You in Life and Death
Estate planning is ultimately about more than just deciding who gets the house and who gets the car.
There are multiple different tools to help you plan for the unexpected (and the expected), prepare yourself and your family, minimize the financial impact of an untimely death, and tackle the matter of post-death taxes before it becomes a gut punch.
If you have questions or concerns regarding estate planning, always consult a legal professional. An estate planning professional would be best equipped to consult you based on your specific circumstances and unique situation.