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How to Pick a Trustee, Executor, and Agent Under a Power of Attorney

While the term fiduciary is a legal term with a rich history, it very generally means someone who is legally obligated to act in another person’s best interests. Trustees, executors, and agents are all examples of fiduciaries. When you pick trustees, executors, and agents in your estate plan, you’re picking one or more people to make decisions in your and your beneficiaries’ best interests and in accordance with the instructions you leave. Luckily, understanding the basics of what each of these terms means and what to consider when making your choices can make your estate plan work far better.

Trustee

A revocable living trust is often the center of a well-designed estate plan because it is simply the best strategy for achieving most individuals’ goals. In many revocable living trusts, you will serve as the initial trustee and will continue to manage the trust assets as you had in the past. Your successor trustee will be responsible for making sure your wealth is passed on and managed in accordance with your wishes after your death or during your incapacity. Like each of the following individuals involved in your estate planning, it’s best to have a trusted person or financial institution carry out this vitally important role.

It’s important to make the language in your trust as clear as possible so that your trustee knows exactly how to handle various situations that can arise is asset distribution. Lastly, your trustee will only control the assets contained within the trust — not the rest of your estate, the reason why completely funding your living trust is crucial.

Powers of Attorney

Your power of attorney is the document in your estate plan that appoints individuals to make decisions on your behalf if you become unable to do so yourself. There are a few different types of powers of attorney, each with their own specific provisions. There is quite a wide range of situations covered by various powers of attorney, and we can help you decide which types you’ll need based on your current situation and future goals. Here are two common types to cover in your estate plan:

Financial Powers of Attorney

Financial powers of attorney grant individuals the ability to take financial actions on your behalf such as purchasing life insurance or withdrawing money from your accounts to cover your expenses. A person who acts under the authority given in a power of attorney is generally called an agent. Regarding financial decisions, an institution like a trust company, can also be named. Keep in mind that trust companies will charge a fee for this service.

Health Care Powers of Attorney

Health care powers of attorney cover a wide range of specific actions that can be taken regarding an individual’s medical needs such as making decisions about the types of care you receive or who will be providing the care.

Executor

Your executor is the person who will see your assets through probate, if necessary, and carry out your wishes based on your last will and testament. Depending on your preferences, this may be the same person or institution as your trustee. You might also see this position designated as personal representative, but it means the same thing.

Some individuals chose to go with a paid executor. This is usually someone who doesn’t stand to gain anything from your will, and is often the best choice if your estate is large and will be divided among many beneficiaries. Of course, family or friends can also serve, but it’s important to consider the amount of work involved before placing this burden on your family or friends.

Being an executor can be hard work and may have court-ordered deadlines, so it’s crucial to pick someone you know will be up for the job. They will probably need to hire a CPA to help sort out your taxes and a lawyer to assist in the process. Of course, if there’s a dispute, attorneys, appraisers, mediators, or other professionals will undoubtedly need to be involved. Choosing a spouse or someone else intimately involved in your life can be convenient because they may already be familiar with your assets and have an easier time making sure your wishes are carried out. However, because of the time involved and the nature of some assets, they may not be up to the task at the time.

Get in touch with us today

Let us help you make the process of picking your trustee, powers of attorney, and executor as smooth and headache-free as possible. Once you have these choices in place, you’ll be able to rest easy knowing that your estate plan is in good hands no matter what life brings. Call or contact us to make an appointment today.

An Estate Planning Checklist to Facilitate Wealth Transfer

Studies have shown that 70% of family wealth is lost by the end of the second generation and 90% by the end of the third.

Help your loved ones avoid becoming one of these statistics. You need to educate and update your heirs about your wealth transfer goals and the plan you have put in place to achieve these goals.

What Must You Communicate to Future Generations to Facilitate Transfer of Your Wealth?

You must communicate the following information to your family to ensure that they will have the information they need during a difficult time:

Net worth statement, or at the very minimum a broad overview of your wealth
Final wishes – burial or cremation, memorial services
Estate planning documents that have been created and what purpose they serve:
Durable Power of Attorney, Health Care Directive, Living Will – property management; avoiding guardianship; clarifying wishes regarding life-sustaining procedures
Revocable Living Trust – avoiding guardianship; keeping final wishes private; avoiding probate; minimizing delays, costs and bureaucracy
Last Will and Testament – a catch-all for assets not transferred into your Revocable Living Trust prior to death, or the primary means to transfer your wealth if you are not using a Revocable Living Trust
Irrevocable Life Insurance Trust – removing life insurance from your taxable estate; providing immediate access to cash
Advanced Estate Planning – protecting assets from creditors, predators, outside influences, and ex-spouses; charitable giving; minimizing taxes; creating dynasty trusts
Who will be in charge if you become incapacitated or die – agent named in your Durable Power of Attorney and Health Care Directive; successor trustee of your Revocable Living Trust and other trusts you’ve created; personal representative named in your will
Benefits of lifetime discretionary trusts created for your heirs:

Fosters educational opportunities
Provides asset, divorce, and remarriage protection
Protects special needs beneficiaries (if properly drafted)
Allows for professional asset management
Minimizes estate taxes at each generation
Creates a lasting legacy for future generations

Overall goals and intentions for inheritance – what the money is, and is not, to be used for (in other words, education vs. charitable work vs. vacations vs. Ferraris vs. business opportunities vs. retirement), and who will be trustee of lifetime discretionary trusts created for your heirs and why you’ve selected them
Where important documents are located – this should include how to access your “digital” assets
Who your key advisors are and how to contact them

How Can Your Professional Advisors Help You Communicate Your Wealth Transfer Goals?

Your professional advisors are well-positioned to help you discover your wealth priorities, goals, and objectives and then communicate this information to your heirs. This, in turn, will prepare your heirs to receive your wealth instead of being left to figure it out on their own and, as statistics have shown, lose it all.

We are available to assist you with figuring out your wealth transfer goals, putting a plan in place to achieve these goals, and effectively communicating this information to your loved ones.

Call or contact our office now to set up an estate planning consultation appointment. We make tough topics manageable to discuss and talk about.

Year End Estate Planning Tip #3 – Check Your Mental Disability Plan

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is making sure their mental disability plan is up to date.

Three Areas of Your Mental Disability Plan That Are Likely Out of Date

If your estate plan is more than a few years old, then your mental disability plan is likely out of date for the following reasons:

Are your health care directives compliant with HIPAA? While the federal Health Insurance Portability and Accountability Act (known as “HIPAA” for short) was enacted in 1996, the rules governing it were not effective until April 14, 2003. Thus, if your estate plan was created before then and you have not updated it since, then you will definitely need to sign new health care directives (an Advance Medical Directive and a Living Will – insert the names of these documents in your state) so that they are in compliance with the HIPAA rules. With that said, it’s possible that health care directives signed in later years lack HIPAA language, so check with your estate planning attorney just to make sure that your estate plan documents reference and take into consideration the HIPAA rules.

Is your Power of Attorney stale? How old is your Power of Attorney? Banks and other financial institutions are often wary of accepting Powers of Attorney that are more than a couple of years old. This means that if you become incapacitated, your agent could have to jump through hoops to get your stale Power of Attorney honored, if it can be done at all. This could cost your family valuable time and money. Aside from this, in the past few years several states (including Florida and Ohio) have enacted new laws governing Powers of Attorney. If you want to increase the likelihood that your Power of Attorney will work without any hitches if you lose your mental capacity, update and redo your Power of Attorney every few years so that it doesn’t end up becoming a stale and useless piece of paper.

Does your estate plan adequately address mental disability? A will is something that only becomes effective when you die. With today’s longer life expectancies come increased probabilities that you will be mentally incapacitated before you die. A fully funded Revocable Living Trust is the best way to provide adequately for mental incapacity, but some older trusts do not. If you signed your Revocable Living Trust more than 8 to 10 years ago and haven’t updated it since or have assets that are outside your Revocable Living Trust, then it may well lack modern and appropriate provisions for what to do with you and your property if you become mentally incapacitated. Have your estate plan checked to ensure that it will work effectively and efficiently if you lose your mental capacity. Otherwise you and your loved ones may end up in front of a judge who will have to sort out your financial matters – at horrendous cost.

What Should You Do?

Estate planning is about much more than having a plan for who gets your stuff after you die – it should also include having a plan for what happens in case you lose your mental capacity. If your plan is more than a few years old or does not include a fully funded Revocable Living Trust, then chances are it lacks a good mental disability plan. Now is the time to meet with an experienced estate planning attorney to ensure that you have a mental disability plan that will work the way you expect it to work if it’s ever needed. Call or contact our office now to set up an estate planning consultation appointment. We make tough topics manageable to discuss and talk about.

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