Do I need both a Power of Attorney and an Executor? This is a question we hear and see asked online often.
A Power of Attorney is a document wherein you name a person, often called your agent, to handle financial and health care matters while you are alive. Generally, the authority ends when you die and then your executor takes over. A Will is where you name a person, your executor, to take care of your affairs after you die. The executor has no authority to act while you are living.
Power of Attorney — Financial
A Financial Power of Attorney (FPOA) can specify whether your agent has the authority to act for you as soon as the document is signed, meaning the FPOA is immediately effective, or, that a doctor’s note must be attached stating that you are not able to perform your duties in order for the document to be used, meaning the FPOA is springing. In most cases, if you are choosing a person or institution that you trust, it makes sense to have an immediately effective FPOA. FPOAs signed on or after January 1, 2015 are governed by Act 95. The agents you choose have various duties, and you can choose to give them certain powers, called “hot powers,” in addition to the normal items like paying bills or selling property. For example, if you would like your agent to be able to change your beneficiary designation on a retirement account or make unlimited gifts to your spouse or others, that hot power must be explicitly stated in your FPOA.
If you become incapacitated and there is no FPOA or your agent is unavailable or unwilling to act, there is no one under the law who can automatically handle your finances for you. Your loved ones would have to pursue a guardianship proceeding in court in the county where you reside. This takes time, involves your physician and may result in family contention over the appropriate person to serve.
Power of Attorney – Health Care
A Health Care Power of Attorney (HCPOA) is by definition springing. In other words, your physician must say that you are unable to make or communicate your health care decisions for yourself. In that case, your agent(s) will step in and make decisions for you. A HCPOA typically covers HIPAA (privacy) information, care decisions and end-of-life decisions.
If you become incapacitated and you have no HCPOA or similar document, Act 169 governs your default decisionmakers. Those decisionmakers may not be the person(s) you would choose. And Act 169 has some restrictions on end-of-life choices that may not be what you would want.
Your will governs who inherits the assets that are in your name alone when you pass away. And, the executor you name in that will is in charge of following your will, marshaling and safeguarding your assets, valuing your assets, giving notice to beneficiaries, paying creditors, and determining and making sure inheritance tax is paid in a timely fashion. Finally, the executor distributes the assets to your named beneficiaries.
If you do not have a will or there is no named executor in your will who is alive or willing to act, then an administrator is appointed under the Probate, Estates and Fiduciaries Code. This law gives top priority to those persons entitled to your residuary estate under your will and your surviving spouse.
You need both a Power of Attorney and an Executor. Be prudent and kind to your family and plan ahead. Don’t leave them in the position that they have to go to court to be appointed as your guardian to handle your finances or your administrator. Take the time to choose the best person to do each of these jobs. Relying upon Pennsylvania laws as to who can be in charge of your affairs will more than likely result in someone you would not select.
For more details on the differences between Powers of Attorney and an Executor and how to choose them, you can watch our free webinar Do I Need Both a Power of Attorney and an Executor?