Granting someone a power of attorney (POA) gives the person you designate the right to take care of common financial matters for you. However, if the POA document fails to include the power to change your living trust, your agent doesn't have the right to do so.
What rights does a power of attorney have?
Attorneys draft financial POAs so that your agent receives the rights and powers you want to confer. Types of financial POAs include:
- General power of attorney. A general or regular POA gives your financial agent the right to perform common POA transactions, such as filing your taxes and managing your banking. This type of POA expires if you become incapacitated.
- Durable power of attorney. This type of POA is like a general POA but stays in effect even if you become incapacitated.
- Special or limited power of attorney. This POA is for a specific purpose, such as the sale of a house. Special or limited POAs restrict what your agent can do. Such POAs can also limit the POA's duration, such as for two weeks when you're out of the country.
Rights under a general or durable POA depend on how your attorney drafted the document as well as the governing state law. Some of the common rights a financial POA has on behalf of the principal include:
- Filing taxes
- Engaging in banking
- Paying bills and managing debt
- Hiring appropriate experts, such as accountants and attorneys
- Applying for benefits
- Overseeing the principal's real and personal property
- Filing lawsuits for the principal
What is a revocable living trust?
A revocable living trust is an estate-planning tool, created by a trust agreement, that allows you to place your property in a trust with the right to use the property during your lifetime. The trust's “settlor" is often the original trustee, or the person who manages the trust.
Upon the settlor's death, a successor trustee takes their place and distributes the trust's property to the named beneficiaries in accordance with the trust agreement.
Can your agent change your living trust?
If you want to give your agent the power to change your living trust, or change something such as bank account beneficiaries, you must specifically grant these rights in your POA document. Any type of financial POA can list these powers, but it must specifically outline the powers or the agent will be unable to exercise them.
In some states, your agent must have both a POA document and a trust agreement allowing them to change a living trust. However, many states allow an agent to change a living trust if that power is only contained in the POA document. In other cases, after the POA grants the agent the power to change the trust, the agent can execute a release for the trustee to sign, which allows the agent to access property that's inside the trust.
If you want your agent to handle financial matters inside the trust, it's also possible to make your POA the trustee. You should first be confident that your agent is completely trustworthy, as they're not monitored unless someone brings a lawsuit for mismanagement.
How your agent can change your living trust
Once your agent has the right to change your living trust, they can make changes under the right circumstances, such as in a divorce, when a beneficiary is no longer alive, or if a child has been born. If the reason is legitimate, the POA can make changes so long as they're protecting your best interests.
You can have your agent change your trust in several ways, which include the following:
- Amend the trust. An amendment form allows your agent to change something about the trust while keeping the rest of the trust agreement intact.
- Restate the trust. This allows the agent to recreate the trust and incorporate changes. During restatement, the trust is still intact but it follows the new trust agreement once that's in effect.
- Revoke the trust. This is the least effective option because it requires the agent to remove everything in the trust, then add the same property to the new trust. It involves more headaches than amending or restating the trust because it involves more work.
No matter how your agent changes your trust, it's important to involve an estate attorney to help make the changes. If you give your agent the right to change your trust in the POA document, make sure it's done correctly, using an experienced attorney to make necessary changes.