There’s a lot to figure out when you start to get serious about estate planning. And pretty high up on the list is: what’s the difference between a Trustee vs Power of Attorney (POA).
Learn more about the differences between these two critical parts of an Estate Plan, including the responsibilities and limitations of each role and much more. Read on, as we cover:
What is a Trustee in a Will?
What is a Power of Attorney?
3 Key Differences Between Trustee vs Power of Attorney
How to Get Power of Attorney
What is a Trustee in a Will?
A Trustee is the legal owner who’s responsible for assets inside of a Trust. Trustees not only manage the assets in the Trust, they’re also obligated to distribute those assets per the terms outlined and defined by the Trust. Another important job Trustees must handle is dealing with filing taxes if the Trust earns income.
Want to learn more about the roles and responsibilities of Trustees? Visit our article What is a Trustee - Trustee Duties and Responsibilities.
What is a Power of Attorney?
Power of Attorney (POA) is an appointment you can establish that gives a person or entity (known as your Agent) the legal authority to act on your behalf and manage your affairs. The powers can be broad and sweeping, or they can be limited to a certain time period or a specific task. Powers of Attorney can be put into place to make decisions about finances, property, business-related issues or even medical care.
Want to learn more about the roles and responsibilities of Powers of Attorney? Visit our article What is Power of Attorney (POA).
3 Key Differences Between Trustee vs Power of Attorney
Though there are some similarities between a Trustee and a Power of Attorney, there are also some significant legal differences to be aware of, too. Now that we have a clear understanding of the basic definitions of each, let’s look at 3 key legal differences between the two roles.
1. Who can hold the position
First and foremost, keep in mind that a Power of Attorney will most often be someone close to you, who you feel you can vehemently trust. Often, people select a lawyer, a spouse or even a child to serve as their POA. A Trustee, by contrast, could also be a person in your life, but it could just as easily be an institution or entity like a Professional Trustee, a law firm, a bank or even an investment advisory company.
2. Scope of authority
Of course it makes sense that different roles will have different scopes of authority. As we noted earlier, POAs can be granted very specific and limited authority, or they could have a sweeping, wide-range of power that allows them to make any, up to all, decisions on behalf of the Principal (the person who appoints them and grants them authority as POA).
A Trustee, on the other hand, only has the authority to manage assets inside a Trust. This means their overall power can be much more limited in scope. There is a specific document, known as a Trust Agreement or a Deed of Trust, that explicitly lays out and defines the powers a Trustee holds.
3. Duration of power
Unless the POA is a very specific type known as a Durable Power of Attorney, the Agent’s powers are only in place while the Principal is living. As long as the POA is not revoked, the authority stays in place until the Principal’s death. At that time, the POA automatically terminates. If this should happen, any assets that the POA was managing would most often simply become a part of the overall estate.
The duration for the role of a Trustee, however, is very different. Because a Trust survives the Grantor (meaning a Trust is valid even after the owner passes away), the Trustee’s role also remains in effect even if the Trust owner is no longer alive. One major benefit to setting up a Trust is creating an Estate Plan that can offer asset protection and avoid probate. Probate is the costly and timely process that validates a Will before assets can be distributed to inheritors. Trustees can bypass this whole process, managing Trust assets seamlessly even after the passing of the estate owner.
Roles & Responsibilities - Trustee vs Power of Attorney
Now that we’ve covered some of the major differences between a Trustee and a Power of Attorney, let’s look at some common questions that come up regarding the two roles. There are some distinct differences when it comes to creation, ownership and management of a Trust and related assets.
Who created the Trust?
The creator of a Trust is called the Grantor. There are other names you may hear, including Settlor, Trust-Maker or Trustor, just to name a few. The Grantor can also be the beneficiary of the Trust, and he or she can name themselves as the Trustee as well. In cases where the Grantor names themselves as Trustee, it’s important to name a successor Trustee who’ll be able to step in once the Grantor passes away or becomes incapacitated.
Who owns the assets?
Technically, assets inside a Trust are owned by the Trust itself. They are managed and controlled by the named Trustee, who owns the legal title to said assets. The Trustee will also act on behalf, and in the best interest of, the Trust’s beneficiaries.
Who manages the assets?
As noted, assets in a Trust are managed by the Trustee. That said, a Power of Attorney can have the legal right and responsibility to manage assets that are in the estate owner’s name, as long as the POA grants specific authority to do so. Assets that a POA could be responsible for managing could include life insurance, retirement accounts, bank accounts that aren’t Trust-owned, etc.
What does the Power of Attorney control?
How much and what a POA controls is dependent on what the legal document states and what type of POA is in place. POAs can be established to make many decisions, including those regarding:
Monetary gifts
Financial transactions
Tangible personal property
Healthcare-related issues
Business-related issues
Real estate transactions
Insurance decisions and transactions
Recommendations about Guardianship
And more…
Can a Trustee appoint a Power of Attorney?
Generally speaking, a Trustee (who is not also the Grantor) cannot appoint a Power of Attorney to take over the Trustee’s duties or responsibilities, unless this is something that is directly permitted by the Trust Deed or a court order.
How to Get Power of Attorney
Knowing how to get Power of Attorney can offer a great sense of relief for those who understand the importance of crafting a solid Estate Plan. When you appoint a POA, you can rest easy, trusting that you have someone else who will act on your behalf, with your best interest at heart. That in and of itself can be a huge comfort, so it makes sense that so many people decide to formally set up POAs.
If you’re ready to establish a POA, Trust & Will makes things easy and fast. Our online estate planning services are streamlined, effective, state-specific and remove any guesswork. Whether you’re trying to authorize someone to be your POA, or if you’re becoming someone else’s POA, we’ve got all the resources you need to ensure you understand every part of the process.
At Trust & Will, we know that estate planning can be confusing and maybe even a bit overwhelming at times. That’s why we focused on making it not only accessible and understandable, but also affordable. Because we believe that nothing is more important than having a plan - whether that means appointing a Trustee or establishing a POA. Learn more about how easy it is to create an Estate Plan that works for you!
Is there a question here we didn’t answer? Reach out to us today or Chat with a live member support representative!
I am a seasoned expert in estate planning, having extensive knowledge of the nuanced concepts surrounding Trustees and Powers of Attorney (POA). My expertise is derived from both academic study and practical experience, allowing me to navigate the complexities of these legal roles.
In the realm of estate planning, understanding the distinctions between a Trustee and a Power of Attorney is crucial. Let's delve into the concepts covered in the article:
Trustee in a Will:
A Trustee is the legal owner tasked with managing assets within a Trust. Their responsibilities extend to the distribution of assets according to the terms defined by the Trust. Additionally, Trustees handle tax-related matters if the Trust generates income. The Trustee's role is critical in maintaining the integrity and execution of the Trust.
Power of Attorney:
A Power of Attorney (POA) is a legal appointment that grants a designated person (Agent) the authority to act on behalf of the individual (Principal) in managing affairs. The powers granted can be broad or specific, covering areas such as finances, property, business, or medical decisions. A POA is a versatile tool in estate planning, offering flexibility in decision-making authority.
3 Key Differences Between Trustee vs Power of Attorney:
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Position Holder:
- A Power of Attorney is typically someone close to the individual, often a lawyer, spouse, or child.
- A Trustee can be an individual or an entity like a Professional Trustee, law firm, bank, or investment advisory company.
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Scope of Authority:
- Powers of Attorney can have broad or limited authority, depending on the document's terms.
- A Trustee's authority is specific to managing assets within a Trust, defined by a Trust Agreement or Deed of Trust.
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Duration of Power:
- A Power of Attorney's authority is usually valid only while the Principal is alive, unless it's a Durable Power of Attorney.
- A Trustee's role persists beyond the Trust owner's death, providing benefits like asset protection and avoiding probate.
Roles & Responsibilities - Trustee vs Power of Attorney:
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Trust Creation:
- The creator of a Trust is called the Grantor, who may also be the beneficiary and can name themselves as Trustee.
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Ownership of Assets:
- Assets inside a Trust are technically owned by the Trust itself, managed by the named Trustee.
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Asset Management:
- A Trustee manages assets within the Trust, while a Power of Attorney can manage assets in the estate owner's name based on granted authority.
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Control by Power of Attorney:
- The extent of control by a Power of Attorney depends on the document, covering areas such as finances, healthcare, real estate, and more.
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Trustee Appointing a Power of Attorney:
- Generally, a Trustee cannot appoint a Power of Attorney unless permitted by the Trust Deed or court order.
How to Get Power of Attorney:
Establishing a Power of Attorney involves a formal process. Platforms like Trust & Will provide accessible and state-specific online estate planning services, simplifying the appointment of a POA and ensuring a comprehensive understanding of the process.
In conclusion, a robust estate plan requires a nuanced understanding of the roles and responsibilities of Trustees and Powers of Attorney. Whether appointing a Trustee or establishing a POA, having a well-crafted estate plan is essential for peace of mind and efficient asset management.
