It is very common to mistake the roles of a Personal Representative and an agent under a Financial Power of Attorney. To understand the differences, we must compare when they are able to act and what they are able to do.
- A Financial or “Durable” Power of Attorney.
When you sign a financial power of attorney, you are selecting another person (an “agent”) that can make financial decisions on your behalf (you are the “principal”). The principal can provide the agent with broad or restricted powers. Most powers of attorney allow the agent to make decisions concerning real property, banks and other financial institutions, insurance and taxes. However, there are specific powers that must be expressly provided in the document in order to be exercised, such as gifting property or creating trusts.
You decide when you want your agent to act. Most powers of attorney become effective immediately unless the principal designates otherwise. This allows the agent to act as soon as necessary, in the case of emergency. However, some prefer a “springing” power of attorney that becomes effective only upon the principal’s disability or incapacity. Your disability or incapacity is usually determined by the court or by two licensed physicians who provide written statements with evidence that you are unable to handle your finances.
The power of attorney creates a fiduciary relationship between the agent and the principal. Acting on behalf of another person is a great responsibility and the agent may be liable for their actions. Usually a spouse or close family member is named as the primary agent. Successor agents should also be named in case your primary agent is incapacitated or deceased.
Finally, and most importantly, a power of attorney ceases to be effective upon the death of the principal or when the principal revokes it. A power of attorney cannot be used to manage your assets after you pass away. That job is saved for the personal representative.
- A Personal Representative.
Commonly referred to as an executor of an estate, a personal representative is the person designated by a will or by the court to administer the estate of a decedent. The personal representative is usually a surviving spouse or a family member. A probate (the legal process of opening an estate) is required in order for a personal representative to be appointed. The personal representative is tasked with settling and distributing the estate of the decedent. Unlike a power of attorney, a personal representative cannot act during the lifetime of the decedent.
A personal representative receives their authority from “Letters of Testamentary” provided by the court. Their duties include collecting the assets of the estate, paying expenses and valid creditor claims, and distributing the estate property to the correct beneficiaries. The administration of the estate will be dictated by the decedent’s will or, if the decedent did not have a will, by the intestate laws of Idaho. The personal representative has a fiduciary duty to protect the estate assets and distribute according to the Will or Idaho Law.
It is important to name your desired personal representative in your Will and dictate how your estate should be administered and distributed.
If you wish to discuss estate planning for yourself or a loved one, please contact our office at (208) 387-0729.
