Power of Attorney vs Living Trust
Why do I need a power of attorney if I have a trust? How do they play together? Well, this is very important. So again, this all starts with a trust.
A trust is a bucket. You fill it up with things. Now if you become incapacitated or go into the hospital and can’t make decisions, the trust turns on and when it turns on the powers of the trust control, another person could come into place and manage those assets. But what happens if those assets are not part of a trust, right?
Let’s say they are left outside the trust or they’re an IRA, which can’t go into a trust. A 401k cannot go into a trust, jointly held property, not in a trust. What happens then? Then you need another document called a power of attorney.
And this power of attorney will control the assets that are not inside of the trust.
Now, a lot of people say, well, I’m power of attorney. Can I control the trust? No, the power of attorney does not control the trust.
The trust has language like a power of attorney inside of that trust that will control. So ask yourself, what bucket are we in? Are we in the trust bucket? You need the trust document, not in the trust bucket. You need the power of attorney and the power of attorney usually needs to reference that specific power in order for you to do it. They are differences between trust, power of attorney, and how you need both documents in reality.
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