Is Someone with Power of Attorney Responsible for Debt After Death?

Melissa Lyken

May 07, 2021

Don't let debt collectors take all you've got.

Summary: Did a family member give you power of attorney before they died? Worried that you'll be stuck with their debt. Find out if you're liable and how to protect what's yours and theirs.

As you probably know, the primary purpose of a power of attorney is to act as another person's legal agent during their lifetime should they need you. But what happens when they pass away? You may be wondering if you will be responsible for any debts after the principal's death. Let's take a closer look.

Respond to debt collectors in 15 minutes and win in court.

Understand How a Power of Attorney Works

A power of attorney is a legal document giving authority to an agent to act on behalf of the principal in the event of incapacitation. Generally, this is the person who is responsible for making decisions for you when you can't.

A principal is a person who designates power of attorney, and the agent is the individual who is given legal power of attorney.

A power of attorney (POA) gives a person or agent authority to manage the principal's affairs, including finances, property, or medical-related decisions. There are three different types of power of attorney.

  • General Power of Attorney. The agent is given overall authority over the principal's finances and manages the principal’s estate and property as per the POA contract. In some cases, the agent can also access the principal's bank accounts and pay for bills and other expenses on the principal's behalf. They can also collect debts and even make investment decisions on behalf of the principal.
  • Specific Power of Attorney. The agent has authority over certain aspects of the principal's affairs concerning their estate and property while alive.
  • Healthcare Power of Attorney. The agent is given the power to decide what kind of medical care the principal receives, including surgeries, hospital/home care, or psychiatric treatment. They also decide on the doctors or care providers and other health-related issues such as the principal's diet and even who bathes the principal.

Note: A power of attorney becomes null and void once the principal dies. The POA will not serve any meaningful purpose because the principal's death relinquishes you from any ownership of assets or property. Dead persons can't legally hold money or own property. However, if stated in the POA, the agent can be authorized to make financial transactions, but the property will now be under the deceased principal's estate and the care of the executor of the estate.

Learn the Difference Between Power of Attorney and the Executor of the Estate

After the expiration of a power of attorney, the executor of the estate becomes responsible for legal and financial matters on behalf of the deceased principal. The executor of the estate is usually named by the will and is bound by its provisions. Essentially, while a power of attorney represents a principal while they are alive, the executor represents the principal after death. Once appointed, the executor can only follow the instructions laid out by the will. If the deceased principal did not leave a will, intestate laws apply to decide how the deceased's estate is managed.

The underlying rule governing an agent's power of attorney is that they must act in their principal's best interest. In this regard, they cannot perform the following tasks:

  1. Alter, modify, or amend a principal's will.
  2. Go against their fiduciary duty to act in the best interest of the principal.
  3. Unless named the executor of the principal's will, make estate decisions after the principal's death.
  4. Transfer power of attorney to someone else, but it is within their rights to decline their appointment at any time.

Know When You May Be Held Responsible for Debt

When it comes to debt, an agent acting under power of attorney is not liable for any debts the principal accrued before being given authority or/and any obligations outside their scope of authority. However, it is critical to note that as an agent, you can find yourself liable for the principal’s debt in several ways:

  • Co-signers. A person who intentionally guarantees or co-signs a debt together with their principal will remain liable after the principal's death. It does not matter who among the two parties benefited from the debt. For example, if the agent signs any contract resulting in debts in their own capacity as a relative and does not follow the guidelines set up in the POA. So, you want to be mindful about creating a situation where you co-sign a debt with power of attorney.
  • Joint Accounts. If the agent and the principal hold a joint bank account, any debt remaining from the account is left under the agent's care when the principal dies. The survivor must settle any debts accrued from the account in full, regardless of who benefited from the loan.
  • Communal Property. In certain states, when you pass power of attorney to your living spouse, the state deems them to have equal responsibility for debts. Under these state guidelines, spousal property (both assets and liabilities) is considered communal. Liability on debt, therefore, falls on the surviving spouse. The nine states with community property laws include California, Arizona, Louisiana, Nevada, Idaho, New Mexico, Washington, Texas, and Wisconsin.

Make the right defense the right way with SoloSuit.

Use the Principal’s Assets to Settle Debts

In the event of death, all the outstanding debts liable to the principal should be settled using the property in their estate left after death. The family members of the principal are not responsible for any debts owed by their deceased relative. However, if a family member or members were co-signatories, guarantors, or joint account holders, the debt will automatically fall to them.

The principal's assets will be distributed among the named beneficiaries of the will only after the debts are paid. You should note that any relative who inherits assets like a car or house with a loan/mortgage, the debt is carried forward to them. Suppose the principal's assets are insufficient and cannot pay all creditors. The estate is usually split up among the creditors. In these cases, the secured creditors get priority.

Having power of attorney is a great responsibility, We hope this information helps you know whether you will be held responsible for any debts held by the principal after their death.

What is SoloSuit?

SoloSuit makes it easy to respond to a debt collection lawsuit.

How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

Respond with SoloSuit

"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James

Start My Answer

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit: A Student Solution To Give Utah Debtors A Fighting Chance

How to Answer a Summons for Debt Collection Guides for Other States

Here’s a list of guides for other states.

All 50 states.

Guides on How to Beat Every Debt Collector

Being sued by a different debt collector? We’re making guides on how to beat each one.

Win Against Credit Card Companies

Is your credit card company suing you? Learn how you can beat each one.

Going to Court for Credit Card Debt — Key Tips

How to Negotiate Credit Card Debts

How to Settle a Credit Card Debt Lawsuit — Ultimate Guide

Get Answers to These FAQs

Need more info on statutes of limitations? Read our 50-state guide.

Why do debt collectors block their phone numbers?

How long do debt collectors take to respond to debt validation letters?

What are the biggest debt collector companies in the US?

Is Zombie Debt Still a Problem in 2019?

SoloSuit FAQ

If a car is repossessed, do I still owe the debt?

Is Portfolio Recovery Associates Legit?

Is There a Judgment Against Me Without my Knowledge?

Should I File Bankruptcy Before or After a Judgment?

What is a default judgment?— What do I do?

Summoned to Court for Medical Bills — What Do I Do?

What Happens If Someone Sues You and You Have No Money?

What Happens If You Never Answer Debt Collectors?

What Happens When a Debt Is Sold to a Collection Agency

What is a Stipulated Judgment?

What is the Deadline for a Defendant's Answer to Avoid a Default Judgment?

Can a Judgement Creditor Take my Car?

Can I Settle a Debt After Being Served?

Can I Stop Wage Garnishment?

Can You Appeal a Default Judgement?

Do I Need a Debt Collection Defense Attorney?

Do I Need a Payday Loans Lawyer?

Do student loans go away after 7 years? — Student Loan Debt Guide

Am I Responsible for My Spouse's Medical Debt?

Should I Marry Someone With Debt?

Can a Debt Collector Leave a Voicemail?

Learn More With These Additional Resources:

Need help managing your finances? Check out these resources.

How to Make a Debt Validation Letter - The Ultimate Guide

How to Make a Motion to Compel Arbitration Without an Attorney

How to Stop Wage Garnishment — Everything You Need to Know

How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)

Defending Yourself in Court Against a Debt Collector

Tips on you can to file an FDCPA lawsuit against a debt collection agency

Advice on how to answer a summons for debt collection.

Effective strategies for how to get back on track after a debt lawsuit

New Hampshire Statute of Limitations on Debt

Sample Cease and Desist Letter Against Debt Collectors

The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah

West Virginia Statute of Limitations on Debt

What debt collectors cannot do — FDCPA explained

Defending Yourself in Court Against Debt Collector

How to Liquidate Debt

Arkansas Statute of Limitations on Debt

You're Drowning in Debt — Here's How to Swim