Personal Representative vs Power of Attorney: Understanding the Key Differences

People often confuse the roles of a Power of Attorney Agent (sometimes referred to as an Agent Under a Power of Attorney) and a Personal Representative (often referred to as an Executor) in a Last Will and Testament. And, the question of personal representative vs power of attorney is one that comes up frequently in estate planning discussionsThese two roles serve completely different purposes and operate at different times. Understanding the difference is essential to ensure that your estate is managed properly not only when you are alive but also after you are gone.

A Power of Attorney Agent is given authority to manage a person's financial affairs during their lifetime, particularly during incapacity, while a Personal Representative handles the administration of a deceased person's estate after death. A fundamental difference is that the authority given to a Power of Attorney Agent ends immediately upon death, while a Personal Representative's authority begins after death when approved by the probate court. These are important roles to fill in your estate plan so that your family and loved ones will be prepared and equipped to manage your affairs when you are alive if necessary and when you are gone.

What is a Power of Attorney?

A Michigan durable power of attorney (DPOA) document allows you to appoint a trusted person as your "Agent" to manage your financial and property matters while you are alive. You can choose to have your Agent's authority to make decisions effective upon signing the DPOA, or limit the authority to go into effect upon your incapacity. Incapacity is typically defined as being "mentally impaired to the extent of lacking sufficient understanding or capacity to make or communicate informed decisions." In a DPOA, a person's incapacity usually is required to be documented in writing by a licensed physician.

Michigan's Uniform Power of Attorney Act ensures that banks and financial institutions cannot reject a properly notarized DPOA and provides sanctions for refusing to accept one. This helps to eliminate the time and expense of having to prove its validity to third parties.

Types of Power of Attorney

In a Michigan DPOA, you can grant a person broad or limited authority to make decisions on your behalf. This can include:

• Managing bank and financial accounts
• Managing, selling, or purchasing real estate
• Managing a business or fulfilling a contract
• Managing investments and filing taxes

You can also limit your agent's authority to specific matters depending on your needs, such as managing an identified financial account or selling a parcel of property.

Choose the Right Person for Your Durable Power of Attorney Agent

The person you choose in the DPOA as your agent can have significant authority, so it is important that you choose someone who is both capable and trustworthy. Another consideration is choosing a successor agent should your first choice of agent become unable to serve for any reason. It is also important that you discuss the appointment with the persons you choose and confirm that they agree to take on the responsibilities of their appointment.

A Durable Power of Attorney Can Be Changed or Revoked

A DPOA can be changed or revoked as long as you are competent and able to make decisions. Consequently, you should periodically review and update your DPOA, along with your other estate planning documents, when there are changes in your life such as a birth, marriage, death of a family member, and other major life events.

Avoid the Risks of Not Having a Durable Power of Attorney

A durable power of attorney is a cost-effective method of providing clarity about who you want to make decisions on your behalf and the scope of their authority. If you do not have one, the risks include:

• Confusion or conflict among family members about who has the right to act on your behalf
• Banks and financial institutions will not allow family members to act without proper authority
• Family members may have to petition the probate court for guardianship or conservatorship
• Court supervision may restrict flexibility and can be expensive and time consuming

What is a Personal Representative?

A Personal Representative is the individual nominated in a Last Will and Testament to administer a deceased person's estate under the supervision of the probate court. Key responsibilities of a Personal Representative include locating and securing all estate assets, obtaining appraisals of property if necessary, filing required court documents, notifying heirs, beneficiaries and creditors about the estate, paying legitimate debts and estate taxes, managing estate property, and distributing remaining assets according to the instructions in the Last Will and Testament. Note that if you die without a Last Will and Testament, all assets of an estate must be distributed according to Michigan's intestate succession laws.

How is a Personal Representative Appointed?

Unlike a Power of Attorney Agent, who is appointed in a document, a Personal Representative must be appointed by the probate court before having any legal authority to act on behalf of the decedent's estate. Being named as Personal Representative in a Last Will and Testament serves only as a nomination for probate court approval. Consequently, the nominated person must file a petition with the probate court to be formally appointed in a court order referred to as "Letters of Authority." If there is no Last Will and Testament naming a Personal Representative, the heirs of the deceased or other persons having an interest in the estate will need to file a petition with the probate court for appointment of a Personal Representative, which may require a court hearing.

A Last Will and Testament should also name a successor Personal Representative if the first person named cannot serve for any reason. The person you choose for Personal Representative should be someone who can effectively manage your estate and has a good understanding of your wishes. It is also important that you discuss the appointments with the persons you choose and confirm that they agree to take on the responsibility.

Estate Planning Considerations

Effective estate planning requires you to understand the distinction between a personal representative vs power of attorney agent, and to consider the management and administration of your property during times of incapacity as well as after you are gone. An experienced estate planning attorney will provide you with guidance for appointing a Durable Power of Attorney Agent and naming a Personal Representative in a Last Will and Testament.

Schedule a Free Consultation with an Experienced Estate Planning Attorney

At Ager Law Office, attorney Bill Ager helps individuals and families with all aspects of estate planning, including the often misunderstood question of personal representative vs power of attorney, Durable Powers of Attorney, Last Wills and Testaments, Revocable Living Trusts, Patient Advocate Designations, and Enhanced Life Estate Deeds/Lady Bird Deeds. From his Ann Arbor office, Bill serves clients throughout Washtenaw County. To schedule a free consultation for an understanding of the cost of an estate plan specifically tailored to your needs, or for updating your existing plan, call (734) 649-0784, send an email to bill@agerlawoffice.com, or use the online contact form on this website.