Blog Author: Stephen C. Hartnett, J.D., LL.M. (Tax), Director of Education,
American Academy of Estate Planning Attorneys, Inc.
This is another in a series of blogs on the basics of estate planning.
Often, one of the most difficult choices for a person to make is the selection of people to make decisions for them. These fiduciaries may have great control over your affairs, typically at times when you would be most vulnerable or already gone.
Let’s take a look at the various fiduciaries a person might name:
- Successor Trustee. This person manages assets in the trust. The Trustee might manage the assets during your incapacity and after you have died. A Trustee might also manage assets being left for a child, whether a minor or even an adult child.
- Agent under Financial Power of Attorney. A Financial Power of Attorney allows the Agent to make decisions and actions for you (the Principal). The power may be “immediate,” which would allow the Agent to act for the Principal even when the Principal is well. Conversely, the power may be “springing,” or only effective upon the incapacity of the Principal.
- Successor Owner. A 529 plan might have a Successor Owner in addition to a Beneficiary. The Successor Owner could take the funds and use them however they want and does not have to use them for the benefit of the Beneficiary. A Trust could be the Owner of the 529 plan, in which case the Trustee would have an obligation to use the plan for the Beneficiary.
- Personal Representative. A person may have assets outside of a Trust which may need to be managed after their death. The individual who would manage these assets prior to distribution under the Will is the Personal Representative.
- Agent under a Health Care Power of Attorney. A Health Care Power of Attorney allows the Agent to make health decisions for the Principal when the Principal is unable to make them.
- Guardian. If you have young children or others for whom you have caregiving responsibility, your Will can nominate a person to become the new Guardian.
Take care in choosing people for these roles who are appropriate and up to the task. For example, the financial management roles, such as the Trustee, Personal Representative, Agent under the financial power of attorney, etc., ideally should be organized and able to manage complicated tasks. On the other hand, the Agent under the Health Care Power of Attorney and the Guardian have different primary duties. Their personal caretaking ability may be more important than their financial ability.
There are many instances in which these decision-makers may have to work together. For example, the Guardian of a minor child will have to work with the Trustee of a Trust for the child’s benefit.
The choice of any fiduciary is of utmost importance and, perhaps most importantly, you should trust the person and their judgement.
The Litherland Law Firm is a member of the American Academy of Estate Planning Attorneys. If you would like to learn more about the importance of estate planning, we invite you to attend one of our free estate planning seminars.
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