Trust vs. Durable Power Of Attorney in California Incapacity Planning
Planning for the possibility of incapacity is an essential step in protecting your financial well-being and ensuring your wishes are honored. In California, two primary legal tools are used for managing your affairs if you become incapacitated: the revocable living trust and the durable power of attorney (DPOA). While both are designed to help others act on your behalf, they serve different purposes and apply to different types of assets and decisions. Understanding how they work, especially in the context of incapacity, is vital to building a complete and effective estate plan.
What Is a Revocable Living Trust?
A revocable living trust is a legal entity you create during your lifetime to hold and manage your assets. As the creator (also called the settlor or grantor), you typically serve as the initial trustee, meaning you retain full control over the assets in the trust while you are alive and capable. You can amend or revoke the trust at any time.
Certain types of revocable living trusts can allow for a successor trustee to take over management of your trust assets if you become incapacitated or unable to manage them yourself. This provision is not automatically included in every trust, which is why it's crucial to work with an estate planning attorney to ensure your wishes are clearly outlined. When properly included, this arrangement helps avoid court involvement and the potential need for a conservatorship.
If incapacity occurs and your trust includes the appropriate provisions, your successor trustee can step in and manage the assets titled in the trust. These can include bank accounts, real estate, investments, and more. The trustee has a legal obligation to manage the assets for your benefit and according to the instructions in the trust document.
However, the trust only applies to assets that have been properly transferred into it. Anything left outside the trust—such as accounts or property still in your personal name—cannot be controlled by your trustee. That’s where a durable power of attorney becomes essential.
What Is a Durable Power of Attorney?
A durable power of attorney (DPOA) is a legal document that gives someone else (your agent or attorney-in-fact) authority to handle financial and legal matters on your behalf. The term "durable" means that the power remains in effect even if you become incapacitated.
You can choose whether the authority is effective immediately upon signing or only begins upon your incapacity. Either way, a DPOA is designed to allow your agent to step into your shoes and take care of important matters, such as paying bills, managing bank accounts, filing taxes, and handling property transactions.
The power of attorney covers matters that fall outside the trust. For example, your agent can manage assets that are not in the trust, contact government agencies on your behalf, or handle retirement accounts and benefits that aren’t typically transferred into a trust. Without a valid DPOA, your loved ones may need to go to court to be appointed as your conservator, which can be costly and time-consuming.
How They Work Together
Both a living trust and a durable power of attorney are crucial tools in incapacity planning, and they are often used together to create a comprehensive safety net.
Trustee’s Role: If your trust includes the right provisions, your successor trustee may step in to manage all assets that have been transferred to the trust if you become incapacitated or are unable to do so yourself. This might include your house, savings accounts, or investments.
It’s important to speak with an attorney to ensure your trust is properly drafted to include this authority. When in place, the trustee follows your instructions and uses the trust funds to support you during your incapacity.
A successor trustee may have the authority to remove a trustee who becomes incapacitated, with or without a doctor's certification—depending on the specific language and provisions outlined in the trust. It’s important to review your trust carefully to understand how incapacity is determined and what steps are required.
Agent’s Role: Your agent under a DPOA can handle everything that is outside of the trust. This may include updating beneficiary designations, accessing your retirement accounts, or dealing with digital accounts. The agent can also help transfer assets into the trust if the DPOA grants that authority.
Because these roles are distinct, many people choose to appoint the same person to serve as both successor trustee and power of attorney agent. This simplifies communication and helps ensure a consistent approach to decision-making. However, you can appoint different people to each role if needed.
Key Differences Between a Trust and a DPOA
While both documents can help avoid court involvement and protect your interests during incapacity, they work in different ways—and not all trusts are drafted with the necessary provisions to allow for a smooth transition. It's important to consult with an estate planning attorney to ensure your trust and power of attorney are properly coordinated and reflect your wishes.
Scope:
A trust only governs assets placed into the trust.
A DPOA applies to matters that remain in your personal name.
Duration:
A trust continues after your death and can control the distribution of assets.
A DPOA ends at your death.
Authority:
A trustee has authority over trust assets.
An agent under a DPOA has authority over personal matters and non-trust assets.
Activation:
A trustee takes over when the current trustee is incapacitated or resigns, if the trust contains the correct provisions.
A DPOA may become effective immediately or only upon incapacity, depending on how it is drafted.
Formality:
Setting up and funding a trust requires more upfront work.
A DPOA is typically simpler to execute but must be specific and up to date to be accepted by financial institutions.
The Importance of Keeping Your Documents Updated
It is not enough to create a trust or DPOA once and forget about them. Life changes—such as marriages, divorces, births, deaths, relocations, or significant changes in assets—may require updates to ensure your plan still reflects your current wishes. In addition, laws and financial institutions’ policies may evolve, making older documents harder to use.
Regular reviews with an estate planning attorney help ensure your documents are legally sound and aligned with your goals. Outdated documents may be challenged or rejected, leading to delays or the need for court involvement. Keeping your documents current is one of the best ways to protect yourself and your family.
Why You Need Both
Some people believe that having one of these tools is enough—but relying solely on a trust or a power of attorney can leave gaps. A trust won’t help with matters that fall outside of it, and a DPOA cannot distribute your estate after death. Having both documents ensures that someone you trust can act on your behalf in a broad range of situations.
With a trust and DPOA in place, your loved ones can avoid conservatorship proceedings, access the funds needed for your care, and make sure your affairs are handled smoothly. Both roles involve significant responsibility, so it’s important to choose people you trust and to clearly communicate your wishes.
Let Devey Law Help You Plan Ahead
At Devey Law, we understand that planning for incapacity is deeply personal—and often overwhelming. That’s why we are here to guide you through every step of creating a living trust and durable power of attorney tailored to your unique needs and values.
We help clients across California protect their assets, prepare for the unexpected, and make sure their wishes are honored. Whether you’re creating a plan for the first time or updating an existing one, we’re here to help.
Reach out today to schedule your consultation. Let’s make sure you—and your family—are fully protected for whatever the future holds.
Need help with Estate Planning, Trust Administration, Probate, or Business Law? Devey Law is here for you. Call us at 805.720.3411 or email info@deveylaw.com to schedule a consultation.
This blog is for informational purposes only and does not constitute legal advice. Reading this blog does not create an attorney-client relationship between you and Devey Law, A Professional Law Corporation. Laws and regulations may change, and the information provided may not reflect the most current legal developments.
