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Friday, July 2, 2010

What happens to a power of attorney when the person giving it dies?

In this post, I'm discussing Enduring (Continuing) Powers of Attorney that were made in advance, then brought into use when the person giving the Power of Attorney (called the "donor") lost his or her mental capacity. Most of the time, these documents are very extensive, and give the Attorney acting under them power to deal with everything from bank accounts to real estate. In some cases, the Attorney looks after the donor's finances for several years.

What happens when the donor dies?

The authority in the Enduring Power of Attorney ends immediately upon the death of the donor. The Will kicks in. The Attorney has to stop making decisions on behalf of the donor and hand over all of the assets to the Executor of the estate.

If there is no Will, the Attorney still has to stop acting as Attorney for the donor. This can be a bit of a tricky situation for the Attorney, as there will be a gap in time from the death of the donor until someone is appointed by the Court to be the Administrator of the estate.

In addition to handing over the assets themselves, the Attorney has to hand over his or her records of what he or she has done with the assets and debts over the months or years acting as Attorney. The Attorney is required to account for everything he or she has done, and if the accounting given is not adequate, the Executor can apply to the court to compel the Attorney to give a more thorough accounting. This might mean that the Attorney has to come up with receipts for major purchases, bank statements or other documentation.

If the Attorney cannot account for money that has gone missing, he or she is at risk for having to repay it from personal funds. Most Executors will be pretty adamant that the Attorney explain himself or herself, as the Executors don't want to have to explain to family members and beneficiaries where missing money has gone.

Sometimes the Attorney and the Executor are the same person, such as an adult child who is in charge of his or her parents' Enduring Powers of Attorney as well as their Wills. This may mean that the Attorney doesn't have to account to another Executor, but it does mean that now that the Attorney is wearing the Executor hat, he or she is accountable to the beneficiaries of the estate.

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