By: Joan Reed Wilson
Most of you are probably sick of hearing me tell you how important having a power of attorney is for anyone aged 18 and older. A Power of Attorney gives the person or people who you nominate and trust the legal authority to manage your financial affairs. Under the document, you are the “principal” and they are your “agents”. It is especially important to have this in place before you become unable to handle your affairs for yourself. Unforeseen medical events and accidents could require the need for a Power of Attorney when you are not expecting it, which is why I recommend that every adult execute one and review it regularly to make sure the appropriate person is in charge of your finances.
Sometimes when people pass away, their agents have been acting on their behalf for many months or years. As the principal ages or suffers through an illness, they may not have the strength or capacity to handle managing their affairs, paying bills and going to the bank. Their agents become accustomed to handling everything for them. Many agents do not know that as soon as the principal dies, the Power of Attorney ceases to have any effect.
Simply put, the Power of Attorney dies with the principal.
This fact can be troubling for many agents who want to manage the principal’s last expenses, like the funeral or medical bills, or have a piece of real estate with expenses like property taxes and utilities that they are expected to manage.
The best way to handle this is to become appointed as Executor of the principal’s estate as soon as possible. Simply being named as the Executor in the Will is not enough to be appointed. The Probate Court is the entity that has the authority to appoint the Executor, so being appointed requires filing a Petition with the Probate Court. The process may take several weeks so there will be a gap in your ability to pay expenses. The sooner you can begin the process, the sooner you can gain legal access to the principal’s funds to ensure that all of his or her expenses are paid timely and with the correct funds. The Petition that is filed with the Probate Court requires a certified death certificate and the principal’s Original Will. It is important to know if the principal executed a Last Will and Testament and where he or she kept the original document. If there is no Will, then the Petition is filed with the death certificate alone and the estate will pass “intestate” to the principal’s heirs at law. Whether the principal had a Will or not, it is also necessary to notify all of the principal’s “heirs at law”.
For those of you who are concerned about ensuring that your loved ones have a smooth transition after your passing, I recommend notifying your named executor where you keep your original Will and keeping a list of the names and address of your heirs with your estate planning documents. This will help your named executor expedite the process of being appointed. Once the Executor (known as an Administrator if there is no Will) is appointed, the appointed individual can access the principal’s funds and begin paying the estate’s expenses with them.
Another way a principal can help expedite their loved one’s ability to access funds to pay his or her expenses immediately after passing is to name that person as a joint owner of the bank account. I do not recommend that you do this with all of your assets and I urge you to consider very carefully what this means. The joint surviving owner becomes the sole owner of the asset. If you name one person as joint owner of all of your accounts, then that person inherits everything, regardless of what your Will says. Please do not do this unless the one person is also your sole beneficiary. For the ease of paying bills immediately after your passing, you could select one account that has enough funds to cover your last expenses until your executor has time to be appointed. Although this grants the person immediate access to the funds, legally it is not the BEST way to proceed, because the surviving owner is not obligated to use any of the funds for the estate’s expenses.
There are other methods to avoid this “gap”, including a probate avoidance plan that includes a revocable trust. If you are concerned about how your estate will pass to your loved ones and want to execute a plan that will make it as smooth as possible for them, we can help.