A power of attorney (POA) is an essential part of an estate plan, but it does not work alone. POAs interact with other estate planning documents, such as wills and trusts, to create a comprehensive plan for managing assets and making decisions.
Understanding how these documents work together can help ensure that your wishes are followed properly.
Powers of attorney and wills
A power of attorney and a will serve different purposes, but both are critical components of an estate plan. A POA allows an appointed agent to manage finances or make healthcare decisions while an individual is still alive.
A will, on the other hand, only takes effect after a person passes away, directing how to distribute assets. In California, a POA does not override the instructions in a will. Instead, it ensures that financial matters are managed if the individual becomes incapacitated before death.
Powers of attorney and trusts
A power of attorney also interacts with trusts in an estate plan. Trusts hold and manage assets, and a trustee oversees them. A POA can grant an agent authority to manage assets that are not in a trust, ensuring proper handling of all assets. If a trust is in place, the trustee manages the assets in the trust, while the agent appointed by the POA handles any assets outside the trust. This division of responsibilities helps ensure effective management of all aspects of an estate.
Creating a comprehensive estate plan
A POA, along with wills and trusts, plays a crucial role in a complete estate plan. These documents work together to provide financial security and clarity, both during an individual’s life and after death. Understanding how these documents interact can help create a more effective estate plan.
