In this Article, I am revisiting a commonly asked set of questions. What is the difference between all of these roles, Personal Representative, Power of Attorney whether Financial or Health Care?
A Personal Representative: Commonly referred to as an Executor of an estate is an individual (or perhaps an institution) designated to administer the estate of a decedent.
As a fiduciary, a Personal Representative must settle and distribute the estate of the decedent as efficiently as possible by adhering to the directions outlined in the decedent’s Last Will and Testament. If the decedent did not create a Will, then by the Intestate laws of Idaho.
The primary duty is to protect the estate in a manner consistent with the decedent’s wishes. Although this may appear relatively simple, it is important that the Personal Representative understand the responsibilities associated with the position. I highly caution people to not view the Estate and themselves as one and the same, for failure to adhere to these duties and responsibilities can result in the filing of lawsuits against the Personal Representative of the estate for breach of fiduciary duty.
Generally speaking, a Personal Representative is responsible for collecting the assets of the estate, protecting the estate property, preparing an inventory of the property, paying various estate expenses, paying valid claims (including debts and taxes) against the estate, representing the estate in claims against others, and eventually distributing the estate property to the beneficiaries. In the event the decedent passed away with a Will, the Will may often impose additional duties on the Personal Representative that are not required by law.
A Financial Power of Attorney: is a legal document that allows one person to act for another person, but the authority comes with duties and responsibilities.
The giver of the authority is known as the principal, while the receiver is referred to as an agent. The agent has both a legal duty to the principal and the duties granted by the power of attorney document.
Once a principal selects an agent, he/she completes a legal power of attorney document.
The document names:
All powers the agent receives,
Any specific limits placed on the agent's power are listed on the document,
Any alternate agents to act if the first agent is unable to act, and
sometimes a termination date. The termination date is the day the agent no longer has the authority to act for the principal and is often used on a power of attorney that is granted for a specific reason only, such as the purchase of a home.
An agent's duties vary depending on what types of powers the principal has granted. Agents may be responsible for signing documents for specific transactions, i.e. loan papers for a home or car, or banking for the principal. An agent might have the power to sign various documents that require the signature of the principal and could represent the principal in front of the Internal Revenue Service. Agents might make gifts or donations on behalf of the principal, if given the specific authority to do so in the power of attorney document, or may have the power to do all of the above and more.
The agent has a legal duty to the principal; he/she must act in the principal's interests and not his/her own when acting as an agent. Agents should keep records of all duties performed on behalf of the principal in case the principal or a court asks for an accounting of the agent's activities. The power of attorney document typically must be filed in the county land records if the agent is signing real estate documents for the principal.
The power of attorney terminates at the death of the principal or in the case of a general Power of Attorney, when the principal revokes it. An agent can continue to act if the principal is incapacitated if that power is specified in the power of attorney document, called a Durable Power of Attorney. An agent can resign, by notifying the principal in writing, if he/she no longer feels he/she can perform the duties, or no longer wants to perform the duties. Although a power of attorney typically begins once the principal signs the document, some powers of attorney don't begin until the principal can no longer act for himself. The power of attorney document itself states when the powers begin.
A Health Care Power of Attorney: is a legal document that allows one person to act for another person if that person becomes incapacitated, perhaps because of a mental illness like dementia, he/she can no longer make health care decisions for himself as he/she once did. If he created a durable medical power of attorney, he named an agent to make his health care decisions if and when he becomes unable to do so and this agent is responsible for following his wishes closely and acting in his best interests.
The person who creates and signs the durable medical power of attorney is called the principal, while the person who is given the power to act on the principal's behalf is generally called the health care agent or proxy. A durable medical power of attorney gives the health care agent broad power and responsibility to make decisions regarding the principal’s medical treatment, including medication, tests, nourishment and hydration, as well as decisions regarding surgery, doctors, hospitals and rehabilitation facilities. However, the principal can limit the agent’s authority and responsibilities by including specific limitations in the document itself.
A principal must be of sound mind when he creates and signs the durable medical power of attorney; thus, it must be signed before the principal becomes incapacitated. Once signed, the agent can only use the power of attorney when the principal is incapacitated, since the agent has no authority prior to the principal’s incapacitation. Depending on state law, before the agent can act, licensed physicians may have to provide written certification that the principal is incapacitated. If, after incapacity, the principal regains his ability to make decisions for himself and is no longer incapacitated, the agent cannot continue to act on his behalf, so the agent has a responsibility to ensure he knows if and when the principal is incapacitated.
When an agent acts on the principal's behalf, she must act with care, competence and diligence. Ultimately, she must have the principal’s best interests at heart. Often, a principal will have a living will or health care directive in addition to his durable medical power of attorney, and the living will or directive helps guide the agent’s decisions. Agents must abide by the directions in a principal’s living will or health care directive. Living wills and directives may spell out the types of medical treatments and life-sustaining measures the principal wants or doesn’t want. For example, a principal’s living will might note that he doesn’t want to go on a respirator or dialysis. A principal may also have a Do Not Resuscitate, or DNR, order, sometimes as part of a living will. If so, the health care agent must ensure the principal’s physicians are aware of this order.