720-730-7274Let’s get started by saying that I do know a financial power of attorney and a living trust are different documents that have different functions and different goals. A living trust is most often a document that describes what happens to your assets after your death, whereas a financial power of attorney (financial POA) allows someone to make decisions for you if you were to become incapacitated, but still were alive. However, because the person who takes over a living trust may do so while you are alive, but incapacitated, this blog post will address some of the most important and common similarities and differences between a living trust and a financial power of attorney.
Financial Powers of Attorney (POA) and a Living Trust Compared Side by Side
What Does This Document Do? A living trust is a document that sets up the distribution of assets out of the trust while a person is alive and after a person has passed away. What Does This Document Do? A financial power of attorney gives someone the ability to make financial decisions for you, if you are alive, but incapacitated and unable to make your own decisions. The property inside of a trust can be accessed and used or distributed by the trustee of the trust, who is the person in charge of the trust. You name a person or entity to act as your agent in the financial POA, and the person or entity you name is in charge of making financial decisions for you. A trust holds onto property for the use and enjoyment of someone called the beneficiary of the trust. The agent is required by law to use your property as it would be in your best interest. The way in which the property is distributed or used is dictated by the terms of the trust agreement, which is a written document that describes how trust property can be used. What Can My Agent Do With My Property? Your agent can use your property to do whatever is possible necessary and in your best interest to handle your property while you are incapacitated. Only property owned or titles in the name of the trust is controlled by the trustee, according to the terms of the trust agreement. A trustee can only deal with property owned by the trust, and is unable to have control or access to any property not owned by the trust. What Property Can My Agent Access? Your agent can access any property you own. The agent can also interact and deal with your creditors, service providers – like a utility company, or handle all of the financial affairs you personally deal with. This is much more broad than only handling trust assets. A trustee can only control property owned by the trust, not anything outside of the trust. Your personal bank accounts, any personal property not titled in the name of the trust – like your car, or any account you personally have – like a utility account or cable TV or TV streaming service account is not covered by the trust agreement and would not be part of what a Trustee can access or deal with, as the Trustee is only authorized to deal with assets owned by the trust. What Property Is Not Available for My Agent to Access? Your agent under a financial power of attorney can access anything that you own, but property owned by your trust, or by any business that you own must be specifically spelled out in a financial power of attorney if you want your agent to be able to access property owned by a trust or a business that you own. Typically assets or property owned by a trust or a business are controlled by the trustee of a trust or the owners of officers of a business, not your agent under a Financial Power of Attorney. The trustee of a trust can only control assets owned by the trust and cannot act on your behalf as it relates to everything you personally own or any accounts or items set up in your own personal name. A trust agreement only controls assets owned by the Trust and cannot really extend to everything you own personally, or any account set up in your name, unless you transfer every single thing you own – your cars, furniture, clothing, groceries, etc. – and every account you have – your electricity ow water account,, your trash collection account, and any digital accounts, like email or social media, which could be more trouble than they are worth! Can I Give My Agent Power to Handle Everything I Own? It is possible to give your agent under a financial power of attorney the ability to handle absolutely everything, including handling all affairs of a trust or all affairs of a business, but doing so can make things much more complicated and not everyone seems to recognize the authority in a power of attorney as it relates to a trust or business as well as we might like. It is far better to have your agent under a financial power of attorney handle your personal affairs, and leave the dealings with a trust up to the named trustee and the dealings with a business up to the named officers or owners of the business. That is just cleaner and easier on everyone!
Living Trust
Financial Power of Attorney (POA)
Who is in Charge of a Trust?
Who is in Charge of a Financial POA?
Who Can Use Trust Property?
How Can the Agent Use Property?
How is Trust Property to be Used?
What Property Is Controlled by the Trust Agreement and Trustee?
What Property Is Not Controlled by the Trustee?
Can I Give My Trustee Power to Handle Everything I Own?
Living Trusts Vs. Financial Power of Attorney in Colorado
In short, even if you have a trust, you need a financial power of attorney and you need to name an agent to handle your personal affairs. You can name the same person to handle both your personal financial affairs and to act as your trustee, but those are different roles, and have different functions. Having both a trustee of your trust and an agent under your financial power of attorney are essential to having your estate plan fully formed, effective, and working. An experienced estate planning attorney can help. Book a call with me now by clicking the link below.
