Understanding the Difference Between a Power of Attorney and a Will
Estate planning involves making critical decisions about your future and your loved ones. Two essential documents in this process are a Power of Attorney (POA) and a Last Will and Testament. While both serve important roles, they function in different ways and at different times. If you’re in Truth or Consequences, having a power of attorney in place ensures that your affairs are managed if you ever become unable to make decisions. Likewise, having a will ensures that your assets are distributed according to your wishes after your death.
What Is a Last Will and Testament?
A Last Will and Testament (often simply called a “will”) is a legal document that outlines your wishes for your assets, dependents, and final affairs after you pass away. In your will, you can:
- Appoint a personal representative (executor) to manage your estate through the probate process.
- Distribute your assets according to your preferences.
- Name guardians for minor children.
- Establish testamentary trusts for beneficiaries.
A will must be signed in front of two disinterested witnesses who are not set to inherit from your estate. It only becomes effective upon your death. If you pass away without a will, state laws determine how your property is distributed, which may not align with your wishes.
What Is a Power of Attorney?
A Power of Attorney (POA) is a legal document that allows you (the principal) to appoint someone (your agent or attorney-in-fact) to handle your affairs while you are still alive. Unlike a will, which takes effect after death, a POA is used during your lifetime.
There are two primary types of powers of attorney:
- Financial Power of Attorney – Grants your agent authority over financial matters, such as:
- Paying bills and managing bank accounts.
- Handling real estate transactions.
- Filing taxes and managing investments.
- Operating a business on your behalf.
- Medical Power of Attorney (Health Care Directive) – Allows your agent to make medical decisions if you are unable to do so. This document may include a living will, which specifies your end-of-life care preferences.
Without a POA, if you become incapacitated, your loved ones would have to go through a court process to obtain guardianship or conservatorship to manage your affairs. This process is costly, time-consuming, and can be emotionally difficult for your family.
Why You Need Both a Power of Attorney and a Will
Many people mistakenly believe that having a will means they don’t need a power of attorney, or vice versa. However, both documents serve distinct purposes:
- A will ensures your assets are distributed according to your wishes after your death.
- A power of attorney allows someone you trust to handle your affairs while you are still alive but unable to make decisions.
For example, if you become seriously ill and have a Truth or Consequences power of attorney, your appointed agent can pay your bills, manage your property, and make medical decisions for you. If you do not have a POA in place, your family may have to go through a lengthy court process to gain legal authority over your affairs.
After you pass away, your POA becomes invalid, and your executor (appointed in your will) takes over. Without a will, the court decides how your assets are distributed based on New Mexico’s intestacy laws, which may not align with your wishes.
What Happens If You Don’t Have a Will or Power of Attorney?
If you do not have a power of attorney and you become incapacitated, your family may need to petition the court for guardianship or conservatorship. This process:
- Can take months to complete.
- Requires court oversight and ongoing reporting.
- May result in someone you wouldn’t have chosen making decisions on your behalf.
If you die without a will, your estate goes through intestate succession, where New Mexico law dictates who inherits your property. This could mean:
- Your assets go to relatives you may not have intended to inherit.
- Unmarried partners or close friends receive nothing.
- A judge, rather than you, decides who becomes the guardian of your minor children.
Read more in our articles, How a Durable Power of Attorney Prevents Complex Guardianship Issues and The Difference Between Power of Attorney and Guardianship
Protect Your Future with Proper Estate Planning in Truth or Consequences
Creating a power of attorney and a will ensures that your financial and medical affairs are in trusted hands. These documents work together to protect you during life and to ensure your wishes are honored after your death.
Don’t wait until it’s too late—take control of your future today by working with the experienced estate planning team at E-Law. Request a discovery call to get started.
Reference: Coeur d’Alene/Post Falls Press (Aug. 29, 2022) “Planning for death probably isn’t the most important part of your estate plan.”
