After a loved one passes, you might find yourself needing to close the deceased's bank accounts or sell their property.
Many people mistakenly believe they can continue using a power of attorney to manage these aspects of the deceased's estate.
However, a power of attorney is no longer valid after death, and the responsibility falls on the court-appointed personal representative or executor to go through probate proceedings instead.
Understanding the estate planning process ahead of time can provide clarity during the difficult times following a loved one's passing.
This article will explore the steps you need to take to properly administer an estate and the alternative procedures available when a power of attorney is no longer an option.
Key Takeaways:
A power of attorney becomes invalid upon the grantor's death, and the responsibility to manage the deceased's affairs falls on the court-appointed personal representative or executor.
When someone who appointed an agent with a durable power of attorney dies, the agent no longer has authority to manage their affairs.
Abuse of power of attorney after the principal's death is a potential crime. Heirs can report disputes to the probate court by filing a petition with evidence and documentation to support the claim.
A Power of Attorney Is Invalid After the Death of the Grantor
A power of attorney is rendered invalid upon the death of the grantor/principal.
A power of attorney document authorizes someone else (commonly known as an agent or attorney-in-fact) to act on behalf of the grantor while they are alive, so it becomes invalid once the grantor passes away.
After the grantor’s death, the agent loses all legal authority to act on their behalf, and any actions taken by the agent would be deemed unauthorized.
So, for example, if your mother appointed you as her agent while she was alive, you may have had the legal authority to manage her finances, pay her bills, sell her property, and file her taxes. However, those powers terminate upon her passing away.
To continue managing her affairs, you must be appointed as the executor of her estate in her will or by the court's appointment as the estate administrator.
Does a Durable Power of Attorney Also Expire After Death?
Yes, a durable power of attorney also expires after the principal's death. A durable power of attorney allows the agent to continue acting on the principal's behalf even if they become mentally incapacitated or unable to communicate, but it doesn't extend past the moment the principal passes away.
As such, a durable power of attorney expires upon the principal's passing.
Imagine John grants a durable power of attorney to his daughter, Sarah, to take care of his finances and make medical decisions on his behalf if he becomes incapacitated. John later falls ill and is unable to make decisions for himself, so Sarah starts managing his affairs. However, when John passes away from his illness, Sarah's authority under the durable power of attorney expires.
If John has a will in place, he may have named Sarah as the executor, giving her the authority to manage his estate after his death. If he did not name an executor in his will, a court may appoint someone else as the estate administrator. In either case, Sarah's authority to manage her father's affairs depends on her appointment as the executor or administrator and NOT on the durable power of attorney.
What is the Difference Between an Executor of a Will and a Power of Attorney Agent?
When deciding how to manage affairs upon their death, a principal may appoint an executor of a will and a power of attorney agent.
An executor's responsibilities come into effect after the principal's death, primarily to ensure that the wishes outlined in their will are carried out and that assets are properly distributed to beneficiaries named in the will.
In contrast, a power of attorney agent's authority to make decisions on the principal's behalf is only valid before the principal's passing.
Example: John appoints his son, James, as the executor of his will and his daughter, Sarah, as his power of attorney agent. After John passes away, James becomes responsible for managing John's assets and ensuring that his will is executed as per his wishes. In contrast, Sarah's authority to act on John's behalf as his power of attorney agent terminates upon his death.
Who Can Act on Behalf of the Deceased if there is not a Will?
If someone dies without a will, their property will be given to beneficiaries as determined by the laws of the state where they lived. These laws vary by location.
However, the probate court must still formally open the estate, and the court must appoint an "administrator" in situations where there is no will.
The administrator is usually the first person in the decedent's next of kin who is willing to apply to the probate court to be appointed as administrator.
The court will then appoint the administrator to settle the deceased person's estate, giving them the same responsibilities as the executor of a will.
In most cases, the appointed person ends up being a family member, but if one comes forward and the deceased has an outstanding bill or liability, a creditor may apply and be appointed as administrator to open the estate and pay themselves back.
Abuse of Power of Attorney After the Principal's Death
As the agent, you are required to stop acting on behalf of the principal immediately after their death. Failure to do so may be considered an abuse of power of attorney, which is a potential crime.
From our earlier example, imagine John's daughter, Sarah, was granted a durable power of attorney to manage John's finances and medical decisions when he became incapacitated. However, after John passes away, Sarah continues to transfer money from John's bank accounts to her own, falsely claiming that John authorized the transactions.
In this case, Sarah's actions would be considered an abuse of power of attorney after John's death. This is illegal and can be reported to the probate court by John's other beneficiaries. The court may order Sarah to return the assets she took, and she may face criminal charges for her actions.
Heirs who suspect abuse of power of attorney can report disputes regarding the misappropriation of assets to the probate court by filing a petition with the court. The petition should state the reasons for suspecting the abuse and provide any evidence or documentation to support the claim.
Once the petition is filed, the court will review the case and may schedule a hearing to gather more evidence and testimony. The agent in question will be notified and given an opportunity to respond to the allegations.
During the hearing, the court will consider the evidence presented and determine whether the agent's actions were an abuse of power of attorney. If the court determines that the agent did abuse their authority, they may order the return of any misappropriated assets, remove the agent from their position, and even charge them criminally.
Note: Most financial institutions will freeze the accounts of deceased persons as soon as they become aware of the death. The freeze typically remains in place until the executor or administrator of the estate contacts the institution. If you try to use a power of attorney after the grantor’s passing, the financial institution will most likely deny your request.
Are There Any Exceptions to the Rule that a Power of Attorney Expires Upon the Death of the Grantor?
Typically, a power of attorney automatically expires when the grantor dies, but there may be some limited exceptions or circumstances where a POA might continue to have an effect after the death of the grantor:
Co-Agents or Successor Agents
An example of a POA with co-agents or successor agents would be a POA granting two siblings joint authority to make medical decisions for their elderly parent.
If one of the siblings dies before the parent, the other sibling may be able to continue making medical decisions for the parent under the POA.
Pending Transactions
An example of a POA that could continue to have an effect on a pending transaction after the grantor's death would be a POA granted to an agent to sell a home on the grantor's behalf.
If the grantor dies before the sale is finalized, the agent may be able to complete the sale as long as the POA contains language indicating that it remains valid in the event of the grantor's death.
Survivorship Provisions
An example of a POA with a survivorship provision would be a joint bank account with a survivorship clause.
If one of the account holders dies, the surviving account holder may be able to continue managing the account under the terms of the survivorship provision.
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