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Blurred lines? The difference between executors and powers of attorney

It’s often wrongly assumed the roles of power of attorney (POA) and executor are one and the same.

Sometimes, for example, a person who has held a POA for years is under the impression this allows them to continue to deal with the granter’s finances and assets — or they are automatically appointed as executor — when that person dies.

In reality, the difference between these two roles is straightforward, but significant.

What’s also significant is the impact of both these appointments on your life and your loved ones.

An executor will administer your will when you die — making sure your wishes are carried out; a POA protects your interests while you’re still alive.

Power of attorney

A POA is someone, or more than one person, you would like to manage your finances and to make decisions about your welfare, if you become unable to do that yourself.

The POA is only active during your lifetime. It has nothing to do with what happens after you die.

At that point, whoever holds the POA no longer has the authority to manage your financial or property affairs. In fact, if an attorney has transacted with the estate after the granter’s death, they may be asked to account for this.

A power of attorney document, which you sign as the person granting the POA, confirms your choice.

A solicitor or medical doctor then countersigns it. You’ll have met them and they will be able to certify you’re of sound mind and not under any pressure to grant the appointment.

In cases where a person doesn’t have the capacity to put a POA in place, the court can appoint a suitable guardian. The authority of a guardian also terminates when you die.

The attorney doesn’t need to be present when you sign the POA — indeed, they shouldn’t be as a rule, to avoid any implication of coercion — but in both Scotland and in England and Wales, the attorney is notified and asked if they consent to act.

Executor appointment

An executor’s appointment, on the other hand, only becomes valid after the person whose estate it is has died.

It is the executor’s duty to administer your will or, where there is no will, to wind up the estate in favour of the entitled beneficiaries. The executor can’t act during your lifetime.

It is not enough to tell someone that you want them to be your executor: this can only be done either through a valid will, or, if there is no will, those entitled to the estate can appoint an executor through the court.

Unlike attorneys, an executor may not know they have been appointed as they are specifically excluded from signing the will as a witness. This would be a conflict of interest and their consent to act in this capacity isn’t needed.

As such, they’ll only know about the appointment while you’re alive if you discuss it with them directly.

And of course, wills can be changed over time, and that includes who is named as an executor.

For most estates, an executor will consult a solicitor to help them administer your estate when you die.

It is almost always necessary for them to apply to the court for authority to deal with the estate’s assets. This is known as probate in England and Wales, and confirmation in Scotland.

Without this authority, the executor can’t withdraw funds, sell property or transfer assets to beneficiaries. Once the estate has been wound up and paid out, the executor’s duties are discharged.

Specific and separate

The roles of attorneys and executors consist of specific and separate responsibilities.

The attorney is bound to act in your best interests as the granter; the executor in the best interests of your beneficiaries.

Both are in a position of trust and often they can be the same people, which keeps things straightforward. But if not, it helps to be clear about where these distinct duties and obligations begin and end.

And crucially, the best approach is to make these arrangements in the first place.

Dara Kinloch

Associate Dara is an experienced private client practitioner, notary public and member of the Society of Trust and Estate Practitioners (STEP). She is also an associate member of Solicitors for the Elderly (SFE), focusing on the particular issues and needs facing elderly clients.

Posted, 10 November 2020 by Dara Kinloch
Categories: Insights | Private client