When it comes to estate planning there are terms and titles that people often use interchangeably. Power of attorney, executor, trustee, and beneficiary are just a few that come to mind. While these titles certainly fit in the estate planning category, each carry their own unique responsibilities and power. Two that are often confused, or lack the true understanding around, are power of attorney vs. trustee. Let’s break down the difference of each role and get into a few other roles that help support estate administration. 

First and foremost, the roles of power of attorney and trustee are very different. Power of attorney (POA) gives a person or group of people the legal authority to make decisions on behalf of another person, whereas a trustee has the legal responsibility to manage and administer a trust. One role, POA, has been granted authority to act on behalf of the person, while the other, trustee, has authority over the person’s assets. 

Now that we’ve covered the major differences, let’s dive into each role individually. 

Power of Attorney 

As mentioned, power of attorney is the legal authority of a person or group of people to act on behalf of another person. By giving someone power of attorney, they essentially opt-in to being a legal decision maker over things like health care decisions and financial matters. However, granting someone else power of attorney does not mean you give away your ability to make decisions.  You are still able to legally make decisions and you have the power to revoke the power of attorney at any point.

Anyone at any time can take on the role of POA. You may find yourself in your late 30’s thinking through your estate plan and considering who will be the decision maker when you are no longer capable. Or, you may find yourself at retirement age wondering who will take over your affairs if you are no longer able to arrange them yourself. At its core, POA gives a friend or family member the ability to help make the right decisions for you. Oftentimes POA’s are utilized when certain conditions are met, such if you become incapacited. Legally, this is known as springing Powers of Attorney. 

In order for POA to be legally binding, both you and your selected POA representative must sign the state-specific POA document and have it notarized, if necessary. There are several different types of POA, which give different decision-making power based on the type selected. 

You can opt in for medical only, financial only, or military POA, which hands off responsibilities to another party while the principal is deployed. Similarly you can select durable or non-durable, which differ in terms of when the authority of POA ends. 

Now let’s talk about what a power of attorney actually does. Depending on which type of POA you’ve arranged, the POA agent has responsibilities such as:

  • Pay bills
  • Access financial records
  • File taxes
  • Manage real estate
  • Decide on living arrangements
  • Select health care team
  • Establish a care plan alongside medical team

There are some things a POA agent can’t do, however. Things like changing the principal’s will, making decisions following the principal’s death, and of course, making decisions for anyone other than the principal’s best interest. 

Trustee

The most glaring difference of power of attorney vs trustee is the control over assets. While a POA agent can make decisions on the principal’s finances and health care, their role essentially dies with the death of the principal. A trustee, however, is responsible for the assets held within a trust and their administration following the trustor’s death or guidelines of the trust document. The trustee has no say over the health or finances of the person, only the assets held within the trust. 

There are essentially three types of trustees you can select from: family trustee, corporate trustee, or private professional trustee. Each comes with its own set of pros and cons, but all bear the same responsibilities. 

What are those responsibilities? Above all else, trustees should uphold their fiduciary duty, or making decisions in the best interest of the trust. Second, they are in charge of managing the estate assets, so things like record keeping, tax filing, accounting, and investment management fall into their wheelhouse. During administration, the trustee may be responsible for locating trust assets and distributing them according to the trust document.

Financial Responsibility

There are so many roles and titles associated with estate planning, but the weight and responsibility each role carries is critical to ensuring your health, money, and assets are protected throughout your life. 

While the differences between power of attorney vs trustee are stark, both carry a level of financial responsibility that can often feel overwhelming. Having an experienced investment advisor on your side can help protect both your assets and investments and the agent in their role. 

Prudent Investors has decades of experience working with both trustees and individuals who carry a fiduciary responsibility. We work to put the needs of our clients first and make investment recommendations that best serve the fiduciaries we support. If you are currently acting as a POA agent or a trustee, connect with our team to schedule a 30-minute no obligation introductory meeting to learn more about our firm and experience helping those in similar roles. 

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Kerrie Lloyd, ChSNC®

Kerrie Lloyd is a Family Fiduciary and a Chartered Special Needs Consultant (ChSNC®). Prior to joining Prudent Investors, Kerrie was a Financial Advisor at Merrill Lynch and she has held leadership positions with the most esteemed names in the financial services industry. With over 30 years in the industry, Kerrie works with fiduciaries, families impacted by disabilities, and the institutions who serve them. Ms. Lloyd has also worked with institutional fiduciaries who manage and sponsor a variety of treasury, governmental, and corporate pooled funds where she was also a registered lobbyist with the State of California. She has also held board of directors’ positions serving the disabilities community and the financial services industry.