In life, planning for the future and securing your assets involves more than just safeguarding your business interests or personal wealth—it also requires strategic legal planning. For UAE business owners, two crucial legal documents that often come into play are a Will and a Power of Attorney (POA). Though they serve distinct purposes, many individuals wonder if these documents can work together to create a comprehensive estate and business continuity plan. The answer is a resounding "yes."

In this blog, we will explore the differences between a Will and a Power of Attorney, explain how these two documents can work together, and highlight why this legal combination is vital for business owners in the UAE.

What is a Will?

A Will is a legal document that outlines how you want your assets to be distributed after your death. It specifies who will inherit your property, financial assets, business interests, and other valuables. Additionally, a Will allows you to appoint an executor to carry out your wishes and, in some cases, nominate guardians for minor children.

A Will is only enforceable after the individual has passed away. It ensures that your estate is handled according to your wishes and avoids legal uncertainties that could arise from intestacy (dying without a Will).

What is a Power of Attorney (POA)?

A Power of Attorney (POA) is a legal document that allows you to appoint another individual (an agent or attorney-in-fact) to act on your behalf in specific legal, financial, or business matters while you are still alive. Unlike a Will, which only takes effect upon death, a POA grants authority during your lifetime, particularly if you are unable to make decisions due to illness, absence, or incapacity.

A POA can be broad or specific in scope, depending on your needs, and can cover tasks such as signing contracts, managing bank accounts, making financial investments, or even dealing with government authorities on your behalf.

Key Differences Between a Will and a Power of Attorney

Before we explore how these documents can work together, it's essential to understand their fundamental differences:

• Will:

  • Comes into effect after death.

  • Distributes assets and determines the guardianship of minor children.

  • Appoints an executor to handle estate matters posthumously.

  • Focuses on long-term asset distribution.

• Power of Attorney:

  • Comes into effect during the principal’s lifetime, usually in cases of absence or incapacity.

  • Authorizes another person to make decisions and manage specific affairs.

  • Ends upon death (when the Will takes over).

  • Focuses on managing short-term legal and financial affairs.

Can a Will and Power of Attorney Work Together?

Yes, a Will and Power of Attorney can work together, and in fact, they complement each other well. While a Will ensures that your wishes are honoured after your death, a POA safeguards your interests during your lifetime, particularly when you are unable to manage your own affairs.

Here’s how they can work together:

• Ensuring Continuity Before and After Death

  • A POA ensures that your business and personal affairs continue smoothly in case of incapacitation. Your designated agent can make crucial decisions, manage finances, and handle daily operations. Upon death, the Will takes over to ensure that your assets are distributed according to your wishes.

  • Example: Imagine you're a UAE business owner who is traveling or suffering from a serious illness. A POA allows a trusted individual to continue running your business and managing your finances. After your passing, your Will ensures that your business interests are transferred to your chosen beneficiaries without legal disputes.

• Managing Health and Financial Affairs

  • A POA can be designed to handle both financial and healthcare decisions, ensuring that someone you trust is making critical decisions on your behalf. This is especially important in the UAE, where sudden illnesses or accidents can leave you temporarily unable to act on your own behalf.

  • Example: If you are hospitalized, your agent under a POA can pay your bills, handle business affairs, and even make medical decisions for you. After your passing, your Will dictates who inherits your assets and how they are distributed.

• Business Succession Planning

  • For business owners, a Will and POA together create a robust business succession plan. A POA keeps the business running smoothly in the event of temporary incapacitation, while the Will ensures long-term continuity after your death by passing your business interests to chosen heirs or partners.

  • Example: Your POA allows your business partner or another trusted agent to manage the company during your incapacity. When the Will takes effect after your death, it transfers your share of the business to your spouse or designated beneficiary, ensuring a seamless transition.

• Minimizing Legal Conflicts

  • By creating both a Will and a POA, you minimize the risk of legal conflicts among family members, business partners, and other stakeholders. The POA provides clarity during your lifetime, while the Will prevents disputes over inheritance after your death.

  • Example: If you have multiple heirs or business partners, a clear POA and Will can help prevent disputes about who should take over your role in the business during temporary incapacity and who should inherit your shares in the long term.

• Comprehensive Asset Protection

  • A POA and Will together protect your assets from unforeseen risks. The POA can ensure that your assets are managed responsibly during your lifetime, while the Will dictates how those assets are divided among your heirs after your death.

  • Example: If you own multiple properties, a POA can authorize your agent to manage rental income or sell properties as needed during your lifetime. After your death, the Will ensures that these properties are passed to the intended beneficiaries.

Setting Up a Will and Power of Attorney in the UAE

The process of setting up a Will and POA in the UAE requires careful legal planning to ensure both documents are enforceable and aligned with your wishes.

• Consult Legal Experts: Consulting with legal professionals who specialize in UAE laws is essential. A lawyer can help you draft a Will and POA that reflect your personal and business interests while ensuring compliance with local regulations. For non-Muslim expatriates, registering a Will with the DIFC Wills Service Centre or the Abu Dhabi Judicial Department is a common practice to ensure that inheritance laws from their home country are recognized.

• Drafting and Notarizing the Documents: Once the documents are drafted, the POA needs to be notarized by a public notary in the UAE. This makes it legally enforceable. Meanwhile, your Will should be registered with the appropriate authorities to ensure that it will be executed upon your death.

• Choosing the Right Individuals: When appointing an agent for your POA and an executor for your Will, choose individuals you trust implicitly. These individuals will play key roles in managing your affairs both during your lifetime and after your death.

• Regular Reviews and Updates: Your circumstances may change over time, so it's essential to regularly review and update both your Will and POA. Whether it's a change in business partnerships, assets, or family dynamics, keeping these documents up to date ensures that your wishes are respected.

To conclude, for business owners in the UAE, a Power of Attorney and a Will are both crucial tools for protecting personal and business interests. While a POA grants authority during your lifetime, a Will ensures that your assets are distributed according to your wishes after death. 

For professional assistance in drafting and registering a POA or Will or setting up your business and for any other legal services in the UAE, please contact us at Firm Advice. Our experts provide comprehensive corporate and legal services to ensure a smooth and compliant process.