Powers of Attorney, Wills and Trusts – Your Local News
When people come to me for estate planning, they get an idea that it’s all about powers of attorney, wills and trusts. They usually don’t know what the difference between them is, or they have misconceptions due to a lot of “fake news” going around. (One of my favorite Twitter accounts is @badlegaltakes. He posts bad legal takes found all over the internet without comment, although the comments on the posts are sometimes hilarious.)
Without getting into whether or not you should have these things, I just want to explain what they are so you can understand the difference.
Proxies. A power of attorney consists of appointing an agent to act on your behalf. “Agent” is one of those legalese words that means something slightly different and very specific in legalese than in English. An agent in the legal world is a person who can act on your behalf for all the purposes you have described in the power of attorney. You can appoint an agent to make health care decisions for you if you are unable to make your own decisions; you can appoint an agent to manage your finances for you; or you can appoint an agent for a specific, limited purpose, such as going to a real estate closing for you.
The important thing to note, especially with financial proxies, is that the minute the person granting the power takes their last breath, the power is gone. A lot of people think they can pay mommy’s bills with mommy’s money after she dies because they have power of attorney, but that’s not true. The current is cut with the life of mom.
Wills. It’s the easiest to understand. A will is an official document that gives instructions on who you want to be responsible for and what happens to your property/things and your minor children after your death. Keep in mind that even though mom’s will says you get everything and you’re responsible, you don’t in fact get anything and you’re not responsible until the probate court approves it. So don’t sell or donate mom’s stuff until you’ve checked her will.
Trusts. Trusts are by far the most complicated of the three. I won’t go into the different types of trusts right now, that’s a whole column (or maybe two) in its own right. Generally, however, a trust is its own entity. Think of a trust as someone you create to hold your money/real estate/things for you. A trust has its own tax identification number (like a social security number), pays its own taxes, and can operate completely independently of you. You create the brains of that trustworthy person, so you can tell what they do with your stuff. There are two main advantages of trusts: 1) Since the trust exists independently of you, if you are sick/disabled/disappeared/dead, it continues to manage your affairs as you have told it to; and 2) Since trust exists independently of you, if someone wants your stuff, they can’t get it from you, since you don’t own it. Technically, it’s not your business anymore – it’s the business of trust, trust just lets you use it.
In short, powers of attorney are useful while you are alive, wills are useful after you die, and trusts can do both.
There are pros and cons to all of this and to doing them in a particular way. Without knowing your particular situation, I can’t tell you which one you should have and why. Many people try to save money by doing it themselves with forms they find on the internet, and almost invariably they mess something up that way and they (or their heirs) end up paying more. money to someone like me to fix the mistake. Better do it right in the first place, I say.
 And you can say they can’t manage your finances for you unless you can’t do it yourself, or you can say they can manage your finances for you now because it’s easier and /or more practical. Some people, for example, are mentally well but physically handicapped and going to the bank is an ordeal.
Nothing in this article should be construed as legal advice. It is offered for informational purposes only.