Given the gravity of ensuring that your estate is administered exactly as you intend, understanding the legal boundaries and capabilities of a power of attorney (POA) in relation to your will is crucial — as estate planning hinges on these two essential components.
While navigating the complexities of these two documents, a question is often raised: Can the agent(s) appointed in a power of attorney document change the principal’s last will and testament?
Short answer: No, the power of attorney agent cannot change a principal’s will even if the principal grants the agent the authority to do so. However, if a power of attorney gives an agent the authority to manage the principal’s financial matters, the agent may manipulate the principal’s assets, possibly resulting in changes in the estate left for a will’s beneficiaries.
Read on to learn more.
Key Takeaways
- An agent’s actions under a power of attorney are strictly limited to the authority specified in the document, which varies based on the principal’s needs and circumstances.
- A POA agent cannot change a will because estate law mandates that only the testator (creator) can modify their will.
- The POA agent’s authority ceases upon the principal’s death, and any attempt to alter the will by an agent is invalid.
- While a POA agent cannot alter a will, they may be authorized to make significant financial decisions that affect the principal’s assets before death.
- If mismanagement occurs, family members could potentially challenge the agent’s actions in court.
Understanding the Role of Power of Attorney
A power of attorney (POA) is a crucial legal document that authorizes one (or more) individual(s), known as the agent(s) or attorney(s)-in-fact, to act on behalf of the document creator, referred to as the principal. The document must be signed and dated by the principal, and it often requires notarization or witnesses depending on state statutes.
Because of the significant powers a POA may grant, principals often appoint a trusted family member as their agent.
What Can an Agent Do?
An agent’s actions are confined strictly within the limits of the specific type of power of attorney. This means that an agent cannot operate outside the boundaries of the authority specifically outlined in the power of attorney document.
The legal scope of a power of attorney may vary depending on the principal’s needs and circumstances. For example, if the principal only needs someone to sign documents for a real estate transaction or handle tax matters, they may use a limited POA to ensure that the agent’s authority is restricted to specific tasks and cannot extend beyond those tasks.
Conversely, if the principal requires more comprehensive assistance, such as managing all financial affairs or making healthcare decisions, they might establish a general POA. A general power of attorney grants broad powers to the agent, enabling them to handle a wide range of activities from banking transactions to managing investments.
Why Power of Attorney Cannot Change a Will
In the introduction of this article, we have already established that a power of attorney’s agent cannot change a properly written will. But why?
Legal Limitations of POA
While a POA can grant an agent various types of authority, power of attorney and estate law imposes certain limitations. One of them is a limitation on the principal’s will management.
The legal framework in every state of the US stipulates that any actions regarding the modification or creation of a will must be executed by the person to whom the will belongs, known as the testator. This ensures that the testator’s true intentions are preserved and legally upheld.
In addition, no deceased individual can legally “own” any assets. In the case of a principal’s properties, the principal’s legal rights transfer to their estate, which only a will’s executor has control over.
What if the POA explicitly states that the agent can change the will?
Such a provision is legally unenforceable. The law mandates that only the testator can alter their will. Any attempt by an agent to do so would be invalid and could be subject to legal challenges.
Effect of POA
A power of attorney is only in effect when the principal is alive. Once the principal dies, the agent loses all their powers, making it impossible for the agent to alter the will posthumously. Even if the agent has broad authority over financial and personal matters, they cannot legally modify or create a will on behalf of the principal before or after their death.
Validity of Will
To be considered valid, a will must be written, signed, and—in some states—witnessed or notarized, strictly adhering to state laws. This process cannot be delegated to another through a POA.
If a will or any of its provisions were created under circumstances like duress or undue influence, they could be challenged and potentially invalidated in court. Therefore, it is essential for the testator to personally ensure that the will reflects their genuine desires regarding the distribution of their estate.
How Power of Attorney May Affect Estate
With that being said, a POA agent may still influence the circumstances surrounding a will and a principal’s assets before they become part of their estate.
Depending on the POA, the agent may have the capability to make significant financial decisions on the principal’s behalf. This includes managing their investments, entering into legal contracts, and even handling significant transactions like buying or selling a home. These actions can have direct implications for the principal’s estate planning.
For example, if an agent decides to liquidate investments or significantly change the composition of the principal’s assets, this could disrupt the specific bequests the principal has laid out in their will, potentially leading to unintended consequences for the distribution of their estate.
Here is a list of authorities a general or financial power of attorney agent may have (depending on state laws and the provisions in the POA), and how each authority could negatively affect the principal’s assets:
- Managing Financial Assets (including real estate transactions and bank accounts): Mismanagement or risky investments can deplete the estate, leaving less for beneficiaries.
- Signing Contracts: Entering into bad deals or poor decisions like taking out loans can drain estate resources, reducing the inheritance for beneficiaries.
- Managing Legal Matters: Pursuing unnecessary legal actions or settling lawsuits for less than their worth can reduce the funds available in the estate.
- Hiring Professionals: Hiring unnecessarily expensive services can eat into the estate’s assets, leaving less for beneficiaries.
- Keeping Records: Poor record-keeping can lead to financial losses and confusion, affecting the estate’s value.
- Filing Documents: Filing incorrect documents can result in penalties, reducing the estate’s worth.
- Business Operations: Mismanagement of a business can lead to bankruptcy, lowering the estate’s value.
- Insurance and Annuities: Canceling policies reduces financial protection for beneficiaries.
- Government Benefits: Failing to secure benefits can reduce the estate’s financial resources.
- Retirement Plans: Early withdrawals with penalties decrease retirement savings and the estate’s value.
- Tax Matters: Mishandling taxes can result in fines, lowering the estate’s worth.
Keep in mind, however, that a POA agent is legally obligated to act in the principal’s best interests, upholding a fiduciary duty that requires them to act with the utmost good faith, loyalty, and care.
This means that the agent must prudently manage the principal’s assets and affairs, avoiding conflicts of interest and self-dealing. The agent’s actions should always align with the principal’s intentions and best interests.
Steps to Protect Your Estate
To protect the principal’s estate and ensure that their wishes are honored after death, take the following steps to mitigate potential risks associated with granting a power of attorney:
- Clear Communication: The principal should communicate clearly with their appointed agent to ensure that any powers granted are carefully aligned with their estate wishes. This alignment helps in preventing any unintended restructuring of assets that could affect the eventual distribution planned for beneficiaries.
- Set Strict Guidelines: The principal should specify clearly and strictly what their agent can or cannot do in the POA. This ensures that the agent acts within the boundaries set, protecting the estate from unintended modifications.
- Update Regularly: Your power of attorney should be reviewed and updated regularly with your legal advisor to adapt to any changes in your personal circumstances or state laws.
- Consult with an Expert: With complex assets at hand, the principal should consider consulting an estate planning attorney to receive guidance in drafting a clear and comprehensive power of attorney document that aligns with their estate planning goals.
How Family Can Mitigate Agent Abuse
If the family discovers that the agent has negatively influenced the estate so that it cannot be distributed according to the principal’s will, there are several steps they can take to address the situation and protect their rights as beneficiaries:
- Review the POA Document and Estate Plan: This helps to understand the extent of the agent’s authority and identify any breaches of fiduciary duty or abuse of power.
- Gather Evidence: Collect all relevant documents, including financial statements, transaction records, and any correspondence that indicates misuse or mismanagement of the asset. This evidence is crucial for any legal action.
- Consult an Estate Attorney: Contact an estate planning attorney to assess the situation and provide legal advice. The attorney can help determine whether the agent’s actions violated their fiduciary duty and advise on the best course of action.
- Challenge the Agent’s Actions in Court: If there is sufficient evidence of mismanagement or abuse of power, relevant parties can file a lawsuit to challenge the agent’s actions. The court can investigate the matter and, if necessary, order the agent to compensate the estate for any losses incurred due to their actions.
- Consider Mediation: If the situation allows, mediation can be a less adversarial way to resolve disputes with the agent. A neutral third-party mediator can help the parties reach a mutually agreeable solution, potentially avoiding a lengthy court battle.
► READ MORE: Who Can Override a Power of Attorney?
Frequently Asked Questions
What are the limitations on the decisions a legal power of attorney agent can make?
A power of attorney agent is NOT authorized (even if otherwise stated on the POA) to:
- Alter or revoke a will or power of attorney;
- Make decisions that conflict with the principal’s best interests;
- Violate the terms set forth in the nominating documents; or
- Make decisions on behalf of the principal after their death.
Other limitations prohibited by law include (but are not limited to) authorizing euthanasia and using the principal’s assets for personal gains.
How can changes be made to a will?
To modify or amend a will, the testator must use a codicil. This is a supplementary document that allows for adjustments to an existing will, such as adding new provisions or removing existing ones.
A codicil to will can only be created by the same testator(s) of a previously executed last will and testament. This means that a will cannot be changed once the testator passes away.
Can a power of attorney change the beneficiary of a life insurance policy?
Only if the state law and the specific power of attorney document allow such a change can a power of attorney’s agent change the beneficiary of a life insurance policy.
