Most of us are aware of what a Will is, and what is does, and most people have heard the term “power of attorney”. But do you know the difference between the two documents and how they may work together?
What is a Will?
A Will is a binding legal document that provides you with a method of sharing instructions for what you would like to happen with your estate with you die. Your estate includes your belongings, your assets and liabilities, and anything else you may own.
Your Will names the people you want your belongings and assets to be given to, and also enables you to set out who you would like to look after your children or pets.
A Will only takes effect when you die, and cannot be used in cases where you are still alive, even if affected by a serious injury or illness that leaves you unable to deal with your affairs. This is where you may need a Power of Attorney.
What is a Power of Attorney?
A Power of Attorney allows you to appoint a person or organisation to make decisions on your behalf while you are still alive. The person you assign can be a family member, friend, lawyer, accountant, or government body such as the State Trustees.
There are several different types of Powers of Attorney. Firstly, you may choose to appoint a general non-enduring Power of Attorney that authorises a person to act on your behalf for a specific purpose, such as while you are overseas. This type of attorney will end once the specific purpose has been completed, or once it is revoked.
You many prefer to appoint an enduring Power of Attorney. This authorises a person to make financial and personal decisions for you during your lifetime. You can choose when it begins, however unlike a non-enduring power, it will continue indefinitely in the event that you lose decision making capacity. That is, you can no longer make decisions on your own. The enduring Power of Attorney is designed to ensure that decisions are being made on your behalf and in your best interests when you are no longer able to do that for yourself.
Typically, powers of attorney will cease once you die, unless they have revoked by you earlier. After you die, your will becomes the most important document.
What is the difference between a Will and a Power of Attorney?
The main difference between a Will and Power of Attorney is when they take effect. As outlined earlier, a will is specifically used to manage your estate when you die, and takes effect after your death. In comparison, a Power of Attorney authorises the person you nominate to act on your behalf and takes effect during your lifetime.
The executor (the person in charge of carrying out your will) has a specific and limited job description. They need to make sure your property and assets are properly distributed. The person or organisation that you have appointed as your attorney will make all kinds of important decisions, but only while you are still alive.
Can the same person hold Power of Attorney and be the Executor of your Will?
Yes, they can indeed. In fact this is very common, because both roles hold responsibilities that you might want entrusted to a particular person or organisation, such as your partner or lawyer.
Keep in mind – naming someone as executor of your will does not automatically give them power of attorney though or the other way around. You still need to create two separate documents, a Will and a Power of Attorney document, to make sure you’re covered for both situations.
Need to prepare a Will and Power of Attorney? Contact Nevile & Co. today to make an appointment with our Special Counsel, Tracy Collins.