Choosing Your Fiduciaries
In planning your estate, among the most important decisions you will make will be your choice of those persons who will be your fiduciaries – the persons you will entrust with your financial well-being and personal health decisions. Those fiduciary positions are your agents under power of attorney for property and power of attorney for health care, trustees, and executors. In making these choices of persons to act as your fiduciaries, keep in mind what will be expected of them and what authority they will hold.
Power of Attorney for Property
A Power of Attorney for Property is a document that allows you to delegate authority to another person, known as your agent, to act on your behalf. The agent may be authorized to act immediately, or only when you are no longer able to act for yourself (known as a “springing” power of attorney). Examples of the types of authorities you will delegate to an agent under power of attorney include paying your bills, managing your investments, and buying and selling real estate. A Power of Attorney for Property can be limited to one decision, or it can be so broadly written that the agent can do almost anything on your behalf. The authority you give is dependent upon the document’s language. When you are deciding on an agent during the estate planning process you are likely going to grant that agent broad powers as it is not possible to foresee what you will need the agent to do for you in the future.
Powers of attorney are a wonderful tool in the hands of a trustworthy person. Because it comes with tremendous authority, it can be a dangerous tool in the hands of the wrong person.
Who is the wrong person?
- Someone with a history of personal financial problems of their own.
- Someone with a mental illness or substance abuse issues.
- Someone who is unable to manage their own financial affairs.
- Someone who has no knowledge of investments or finances.
- Someone who has personal conflicts with your other family members.
Who is the right person?
- Someone whom you trust without hesitation.
- Someone who manages their own finances well.
- Someone who understands investment and finance.
- Someone who has no history of financial problems and is not in debt.
- Someone who has the time and willingness to step in and help you if necessary; and
- Someone who does not have conflicts with your other family members.
It is a mistake to name a child just because he or she is the first born, or to name a child because you are concerned about hurting their feelings. Carefully consider a child’s strengths and weaknesses, and potential for misusing or neglecting their job as your financial agent. It sometimes makes sense to name a person other than a child.
Power of Attorney for Health Care
A Power of Attorney for Health Care is a document that allows you to delegate authority to another person, known as your agent, to make broad health care decisions for you if you become unable to make those decisions for yourself. The agent has authority to decide on all health and care decisions, i.e., withdrawal of life support, treatment decisions, placement in residential care facilities, and home care arrangements.
Who is the right person to choose as your health care agent?
- Someone who is willing and able to spend time advocating for your care.
- Someone who is assertive and willing to research medical options and discuss them with your physicians.
- Someone who understands your end-of-life preferences; and
- Someone who is able to make the difficult decisions you entrust to them, consistent with your wishes.
Who is the wrong person to choose as your health care agent?
- Someone who does not have the time to spend advocating for you.
- Someone who is not interested in medical issues or not able to be assertive with the medical system.
- Someone who may have conflicts, such as a dependent child who lives with you; and
- Someone who does not understand your end-of-life preferences or who is unable to implement your end of life wishes.
Your executor is the person you select to have the legal responsibility to settle your estate when you die. An executor usually is only necessary if you do not have a trust in place. He or she will:
- Coordinate probate matters with your family attorney.
- Take custody of and value all your estate assets.
- Pay all creditors’ claims.
- Close your bank and investment accounts and transfer them to newly created estate accounts; and
- Distribute your assets to the beneficiaries you’ve chosen in your Will.
If a revocable living trust is part of your estate plan, you will need to choose a successor trustee to step in and act if you become unable to act. Your trustee is someone you choose to be legally responsible for managing, investing and distributing your trust assets in accordance with your wishes, and for acting in the best interests of your beneficiaries. His or her responsibilities include:
- Filing income tax returns of the trust
- Trust accounting and administration
- Investment management trust assets
- Trust distributions to beneficiaries in accordance with the trust terms
- Regular communication with and reporting to all of your trust beneficiaries
- Coordinating trust distributions with public assistance payments to a special needs beneficiary
If none of your close friends or family members are capable, you should consider enlisting the services of a professional fiduciary, such as a bank trust or trust company. It is important not to name a person who has conflicts with any of your beneficiaries.
Having the right persons in place to handle your financial and health care decisions for you in the event you become unable to do it for yourself is critical. Give adequate consideration to your choice of agents, trustees and executors.
This information is not to be construed as legal advice. If you have questions about it, please contact us.