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Similarities and differences between a trust and a power of attorney

AUTHOR

Gurmukh Singh

Associate
READ BIO
DATE POSTED
April 24, 2025

A trust exists where property is held by a person, or is transferred to another person to be held for the benefit of themselves or one or more other persons. In simple words, a trust is a legal relationship which arises when one person (the “Settlor”) transfers property to another person (the “trustee”) for the benefit of a third person (the “Beneficiary”).

A power of attorney is a written document by which one person (the “Principal”) grants another person (the “Attorney”) the power or authority to act on his behalf. A power of attorney creates an agency relationship of principal and agent. A power of attorney can be a general power of attorney or a limited power of attorney.

Similarities:

  1. Both a Settlor creating an express trust and Principal making a power of attorney should have the legal capacity. This means that the person should have reached the age of majority and should have the mental capacity to understand the nature and effect of transactions.
  2. Both a trustee of trust and an Attorney of power of attorney act on behalf of other persons whom they also owe fiduciary duty. A trustee owes fiduciary duty to the Beneficiary and an Attorney to the Principal.
  3. Both a trustee and a power of attorney have a duty to account to their respective beneficiaries.
Differences
  1. A trustee acts according to the terms of the trust. Whereas an Attorney acts according to instructions of the Principal as given in the power of attorney.
  2. A power of attorney may be modified by a Principal. Whereas a Settlor cannot modify a trust unless he has reserved the power to modify the trust in the trust document.
  3. A power of attorney terminates on the death of either the principal or the agent. Whereas, the trust is not terminated by the death of the Settlor or Trustee.
  4. A Principal is vicariously liable for acts/wrongs committed by an Attorney while acting within the scope of authority given in the power of attorney. Whereas, the Settlor or beneficiary is not vicariously liable for acts/wrongs committed by the trustee.
It is important to note that whether a person is a trustee, an agent, or both is complicated. Sometimes a trustee may be considered as an agent of the beneficiaries of a trust. For example, in the case of bare trusts arguably depending on the degree of control the beneficiaries have over the trustees. If you are considering making a power of attorney or creating an express trust, our lawyers at Cassady Law LLP would be happy to assist you in meeting your objectives.

Disclaimer

Disclaimer: The information in this article (“Article”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this Article should be construed as legal advice from Cassady Law LLP or the author.

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