Planning for the unexpected is important, especially when you’re faced with big decisions about the future. In order to make the best decisions for you and your family, and protect all of your interests, it is important to know the difference between two important legal documents: a last will and testament and powers of attorney. A will and powers of attorney serve different purposes but often complement one another. This article identifies the differences between wills and powers of attorney and discusses when and how you can benefit from both in order to protect yourself and secure your assets and interests.
Powers of Attorney
A power of attorney gives another adult the legal power to look after your business or personal interests if you cannot do so yourself, whether for practical reasons such as being out of the country or becoming incapacitated.
“Incapacity” includes:
- suffering from a physical injury or mental impairment that prevents you from making decisions about your personal matters
- being arrested and serving time in prison
- disappearing for an extended period
- being out of the country and unable to return
Principal vs. Agent
Ohio law authorizes different types of powers of attorney, each for a particular purpose. The person whose needs are being taken care of is called the “principal.” The person who steps in to handle the principal’s affairs is called an “agent” or “attorney in fact.” The two terms are interchangeable; the label “attorney in fact” can be confusing because the person does not need to be an attorney, but simply has been given the legal authority to make certain decisions on behalf of the principal.
Legal agents or attorneys are tasked with a fiduciary duty—they are legally bound to act in the principal’s best interest. An agent who acts out of their self-interest, like spending the principal’s money or using the principal’s assets for their advantage, can be removed by court order.
Different Types of Powers of Attorney in Ohio
- General: Allows the agent to make various decisions on the principal’s behalf, including forming contracts with third parties.
- Limited: Designates one specific purpose only, such as withdrawing money or retrieving property on behalf of the principal; for example, if the principal’s car is towed and is in an impound lot.
- Financial: Allows the agent to handle financial matters for the principal.
- Springing: Allows the agent to handle financial or healthcare matters if the principal cannot. It is called a “springing” power of attorney because it springs into effect the moment the principal becomes unable to handle their own personal and business affairs.
- Durable power of attorney for healthcare: Allows the agent to make healthcare decisions, including end-of-life decisions if the principal becomes incapacitated.
Ohio law does not require that you use a lawyer to create a power of attorney. Unfortunately, DIY powers of attorney may be unenforceable if their terms are unclear, if they conflict with Ohio law, or if they are improperly executed (for example, if you ask someone to be a witness who has a personal interest in your finances). It’s best to use an attorney to draft your powers of attorney.
Gertsburg Licata’s experienced estate-planning lawyers can draft your powers of attorney as part of your overall estate planning.
Once a person dies, any powers of attorney they have executed are terminated. At that point, the people who have been designated administrators or executors take legal control of the person’s assets.
Wills
A will dictates how your assets will be disposed of, and your affairs wrapped up once you die, compared to powers of attorney which provide instruction on how to handle an individual’s assets and affairs while they are alive.
A will is part of a larger estate plan that every adult should create to forestall family arguments and save loved ones from having to make difficult decisions. Estate-planning documents include wills, trusts, and other documents that express your wishes as to how you’d like your possessions distributed and your personal and business affairs handled once you’re not around to handle them.
A will designates the guardians who will be responsible for children. Estate-planning documents also include advanced medical directives and list your charitable giving wishes for the organizations and causes that are important to you.
Gertsburg Licata’s professional estate planners have assisted hundreds of individuals at all stages of life. To make an appointment to discuss your needs, call 216-573-6000 or contact us here.
Connie Powall, Esq. is a partner at Gertsburg Licata. She can be reached at [email protected] or by phone at (216) 573-6000 x.7036.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction.
