Factors to Consider when Picking Executor, Trustees and POAs

Factors to Consider when Picking Executor, Trustees and POAs

Having your estate planning documents created with an experienced professional is important, as is naming the people who will be putting your plan into action. A key sticking point is often deciding who is the right person for the role, says an article from Nasdaq titled “Estate Planning: 5 Tips to Pick Trustees, Executors and POAs.” It helps to stop thinking about how people will feel if they are not selected and focus instead on their critical thinking and decision making abilities.

Consider who will have the time to help. Having adult children who are highly successful in their professions is wonderful. However, if they are extremely busy running a business, leading an organization, etc., will their busy schedules allow the flexibility to help? A daughter with twins may love you to the moon and back. However, will she be able to handle the tasks of estate administration?

Take these appointments seriously. Selecting someone on an arbitrary basis is asking for trouble. Just because one child is older doesn’t necessarily mean they are capable of managing your estate. Making a decision based on gender can be equally flawed. Naming agents and executors with financial acumen is more important than giving your creative child the chance to learn how to manage money through your estate.

Don’t make the process more complicated. There are many families where parents name all the siblings to act on their behalf, so no one feels left out. This usually turns into an estate disaster. An odd number of siblings can lead to one group winning decisions by sheer numbers, while aggressive, win-at-all-costs siblings—even if it’s just two of them—can lead to delayed decisions and family divisions.

Name the right person for right now. Younger people who don’t yet have children often aren’t sure who their best agent might be. Picking a parent may become problematic, if the parent becomes sick or dies. Naming a close friend in your thirties may need updating if your friendship wanes. Make it simple: appoint the best person for today, with the caveat of updating your agents and documents as time goes on and circumstances change. Remember, circumstances always change.

Consider the value of a professional trustee or fiduciary. The best person to be a trustee, executor or power of attorney may not always be a family member or friend. If a trustee is one sibling and the beneficiary of the trust is another sibling who can’t manage money, the relationship could suffer. If a large estate includes generational trusts and complex ownership structures, a professional may be better suited to deal with management and tax issues.

The value of having an estate plan cannot be overstated. However, the importance of who will be appointed to oversee and administer the estate is equally important. The success of an estate plan often rests on the people who are assigned to handle their respective tasks.

Be candid when speaking with an experienced estate planning attorney about the people in your life and their abilities to manage the roles.

Reference: nasdaq (Sep. 4, 2022) “Estate Planning: 5 Tips to Pick Trustees, Executors and POAs”

Who Is the Best Person for Executor?

Who Is the Best Person for Executor?

Several critical estate planning documents give another person—known as an agent or personal representative—the legal right to act on another person’s behalf. They include wills, trusts, powers of attorney and advance health care directives, as described in a recent article titled “The nomination of trustees, executors and agents” from Lake County Record-Bee.

Your will is only activated after you die. The will and executor then have to be approved by the court. Many people think being named as an executor confers instant authority, but this is not true. Only when the will has been deemed valid by the court, does the executor have the power to act on behalf of the decedent.

After death, the court is petitioned for a court order appointing the executor and then letters testamentary are signed by the appointed executor. An executor then becomes active as an officer of the court with a fiduciary duty to act as personal representative of the decedent’s estate.

If the named person declines to serve, the will should have a secondary person named as executor, who can then request the appointment be validated by the court. Others can petition the court to be appointed. However, it is best to name two people of your choice in your will.

A trust is a separate legal entity with a trustee who is in charge of the trust and its assets. If a revocable will is created, the trustee is usually the same person who has the trust created, also known as the grantor. For an irrevocable trust, the trustee is someone other than the grantor. The appointment does not become official until the appointment is accepted, usually through signing a document or by the successor trustee taking action on behalf of the trust.

Just as an executor might not accept their role, a trustee can decide not to accept the nomination. However, once they do, they have a fiduciary duty to put the well-being of the trust first and manage it properly. You can’t accept the role and then walk away without serious consequences.

Powers of attorney are used while a person is living. The power of attorney’s effective date depends upon what kind of POA it is. A durable power of attorney is effective the moment it is signed. A springing POA sets forth terms upon which the POA becomes active, usually incapacity. The challenge with a Springing POA is that approval by the court may be required, usually with proof from a treating physician concerning the person’s condition.

Similarly, the health care power of attorney appoints a person who acts on behalf of another as their agent for health issues. They can decline the position. However, once they agree to take on the position, they are responsible for their actions.

If the POAs decline to serve and there is no secondary person named, or if all named POAs decline to serve, the family will need to apply for a conservatorship (also known as guardianship). This is a lengthy and expensive process requiring a thorough investigation of the situation and the person who needs representation. It can be contested if the person does not want to give up their independence, or by family members who feel it is not needed.

These are commonly used terms in estate planning. However, they are not always understood clearly. Your estate planning attorney will be able to address specific responsibilities and requirements, since every state has laws and appointments vary by state.

Reference: Lake Country Record-Bee (July 30, 2022) “The nomination of trustees, executors and agents”

Does Power of Attorney Perform the Same Way in Every State?

A power of attorney is an estate planning legal document signed by a person, referred to as the “principal,” who grants all or part of their decision-making power to another person, who is known as the “agent.” Power of attorney laws vary by state, making it crucial to work with an estate planning attorney who is experienced in the law of the principal’s state of residence. The recent article from limaohio.com, titled “When ‘anything and everything’ does not mean anything and everything,” explains what this means for agents attempting to act on behalf of principals.

When a global or comprehensive power of attorney grants an agent the ability to do everything and anything, it may seem to the layperson they may do whatever they need to do. However, each state has laws defining an agent’s role and responsibilities.

As a matter of state law, a power of attorney does not include everything.

In some states, unless certain powers are explicitly stated, the POA does not include the right to do the following:

  • Create, amend, revoke, or terminate a trust
  • Make a gift
  • Change a beneficiary designation on an account
  • Change a beneficiary designation on a life insurance policy.

If you want your agent to be able to do any of these things, consult with an experienced estate planning attorney, who will know what your state’s law allows.

You’ll also want to keep in mind any gifting empowered by the POA. If you want your agent to gift your property to other people or to the agent, the power to gift is limited to $16,000 of value to any person in one year, unless the POA explicitly states the power to gift may exceed $16,000. An estate planning attorney will know what your state’s limits are and the tax implications of any gifts in excess of $16,000.

These types of limitations are intended to give some common-sense parameters to the POA.

Most people don’t know this, but the power of attorney can be as narrow or as broad as the principal wishes. You may want your brother-in-law to manage the sale of your home but aren’t sure he’ll do a good job with your fine art collection. Your estate planning attorney can create a power of attorney excluding him from taking any role with the art collection and empowering him to handle everything else.

Reference: limaohio.com (April 30, 2022) “When ‘anything and everything’ does not mean anything and everything”