Clients frequently ask us the difference between a Living Trust and a Power of Attorney (POA). Many Florida attorneys will recommend using a Living Trust vs. Power of Attorney in the event that you become incapacitated. Here are 6 reasons why a Living Trust can be better than a POA:
1) Banks almost always want an original Financial Power of Attorney. However, banks usually accept a copy of a trust document. (They may require an affidavit from the Trustee that the trust is still in effect, but this is simple to prepare.) This can be a critical distinction if you lose the original financial Power of Attorney.
2) Some bank tellers will insist that they cannot accept a financial power of attorney unless it is “their form”. This is generally not permissible. (Also, see my post about FL Banks rejecting POAs.) As a result, it may take a significant amount of time talking to managers or the legal department before they will agree to use your form. In my experience, financial institutions are far more willing to work with a trustee named in a trust document.)
3) Most banks will only act as your agent if they are a trustee. They usually will not act as your agent under a Power of Attorney. This is very important if you wish for a financial institution, rather than a friend or family member, to manage your fairs in the event of incapacity.
4) With a Florida Living Trust, you can set it up so that someone else starts handling your affairs automatically once you reach a certain age. (For example, if you know that you have a family history of dementia, the trust can require a co-Trustee automatically be appointed when you reach age 75. If you are competent, you can always change this provision because this is a revocable trust.)
5) With a Florida Living Trust, you can designate a third-party trust protector that you have faith in to watch over the trustee, to receive financial statements, etc. This way, if the Trustee abuses their power, the trust protector can have them removed. Obviously, if you have capacity, you can remove the trustee yourself. However, this is particularly important in the event of incapacity. It is also very helpful in second marriage situations
6) A Living Trust is more difficult to change than a Power of Attorney on a practical level. Legally, they are both easy to change. I am simply trying to point out that anyone can download an on-line form and nullify an existing Power of Attorney. The average person doesn’t know how to change a trust, making it more secure. This is particularly important if you think you might have unsavory relatives or unscrupulous caretakers looking after an elderly person.
Do I Still Need a Florida Power of Attorney if Have a Living Trust?
Yes. You still need a Power of Attorney even if you have a Living Trust. The Trustee of a Florida Living Trust can only manage assets inside the trust. You will still need a Florida Financial Power of Attorney to manage your assets outside of the trust, such as IRA and 401(k) assets. You will also need a Financial Power of Attorney to deal with the IRS, Social Security, personal lawsuits, etc.
If you have questions about a Living Trust vs. Power of Attorney, the attorneys at The Pollock Firm LLC would be happy to assist.