Creating a comprehensive estate plan requires careful thought and planning. Numerous decisions must be made during the creation of that estate plan. Most people assume that decisions regarding the distribution of your assets are the most important, but the individuals who you appoint to carry out your wishes (referred to as fiduciaries) often make or break the success of your plan. For that reason, it is imperative that you understand what each fiduciary role encompasses so you can pick the proper person to serve in each role. You are usually picking one main person to act and then several backups in case the previous people are unable to serve. You also have the options of naming professional fiduciaries such as banks or trust companies to serve in some of those capacities.
THE PERSONAL REPRESENTATIVE OF YOUR WILL
A Will includes the appointment of a Personal Representative (a/k/a Executor) who will be responsible for carrying out the directives in your Will, making all decisions for your estate, retaining an attorney, opening a probate estate, filing all necessary probate paperwork, preparing detailed inventories of estate assets, managing, safeguarding and investing those assets, handling creditor claims, defending Will challenges, paying taxes, closing out the estate and distributing the estate assets. The probate process usually takes between 8-18 months to get resolved, and the Personal Representative, along with the assistance of their attorney, handles all aspects of that administration.
Acting as a Personal Representative is a role filled with financial and legal responsibilities. Our office suggests appointing individuals who are good at managing money, organizing accounts and assets, following directions, and dealing with attorneys, accountants, bankers and financial planners. It also requires someone who can be level-headed in dealing with all of the questions and prodding from the beneficiaries who are anxiously awaiting receipt of their inheritance. You do not want to appoint someone who has difficulty balancing their own checkbook, paying their bills or managing their own assets. Usually, the person appointed is a close family relative or friend.
THE TRUSTEE OF YOUR TRUST
Trusts have become a much more common addition to even basic estate plans in recent years. Trusts require you to appoint a Trustee and usually successor Trustees (e.g., backup trustees) who will take over the management of your trust assets if you become incapacitated or pass away. The duties are very similar to the duties set forth above for a Personal Representative, but those duties are conducted without court supervision. Nevertheless, there are still numerous legal requirements that must be met in administering and distributing a Trust. Your Trustee will handle all of those financial matters with the assistance of an attorney. Like a Personal Representative, a Trustee must keep very precise, accurate and detailed accounting records. The same guidelines set forth above for choosing a Personal Representative should be used when picking a Trustee.
THE AGENT IN YOUR GENERAL DURABLE POWER OF ATTORNEY
The Agent you appoint under your General Durable Power of Attorney is given legal authority to act for you and on your behalf on all legal matters. The Agent you appoint has the authority to handle any assets and accounts in your individual name, write checks on those accounts, manage those assets, speak to others and make decisions on your behalf regarding your health insurance, Medicare, your retirement plan, your employment benefits, etc. They can also make legal decisions regarding where you’re going to live if you’re incapacitated, and can sign documents in your name and on your behalf. Again, the same criteria and concerns as set forth above apply to the selection of your agent in this document. Often, people appoint the same person as their Personal Representative, Trustee and as their Agent under their General Durable Power of Attorney.
THE AGENT IN YOUR DURABLE POWER OF ATTORNEY FOR HEATLH CARE AND HEALTH CARE DIRECTIVE
The Agent you appoint in this document can only act when you’re unable to communicate and make your own health care decisions. When that time comes, your Agent will step in and make legal decision on your behalf about what medical treatment you will receive or not receive. They can give authorization for surgery, medication, and all treatment, including making end-of-life decisions. The job of this Agent is not filled with financial responsibilities like the others listed above, and for that reason, people sometimes pick someone different to act in this role. Clients sometimes figure that they are appointing person A as their Trustee, Personal Representative and Agent under their General Durable Power of Attorney as that person is a financial whiz, but maybe that’s not the person they want making medical decisions for them. Nevertheless, you do not have to appoint someone different – it can be the same person. Whoever you appoint should be someone that agrees with your view of medical treatment, and who can handle the pressure of making life and death decisions on your behalf. E.g., if you think such a decision would be too stressful or overwhelming for a particular person to make, you probably don’t want to appoint that person.
THE GUARDIAN OF YOUR MINOR CHILDREN
If you have children under the age of 18, you have the ability to make a recommendation in your Will as to who will act as their Guardian should something happen to both parents. The Guardian is the person who will step in your shoes to raise and care for your children after their parents’ incapacity or passing. This is sometimes an agonizing decision as to who will be appropriate to act in that role. It is usually a close relative or family friend who is willing to take on such role. Factors such as the potential Guardian’s age, relationship with the children, their location, their morals and beliefs, their religion, their current house and living arrangements, and their lifestyle, is often considered when making such a decision.
Understanding the complexity of the various fiduciary roles in your estate plan, as well as the influence that they can have on the success of your plan, should assist you in deciding on the appropriate person to appoint in each particular role. These positions will be discussed in detail by our office as we walk through each document. We take the time to answer any questions you may have in order to ensure you are comfortable in appointing the proper person in each of these documents.
Estate planning attorney Christopher P. Cox has more than 30 years of experience and has helped countless numbers of people with all aspects of estate planning, probate and trust administration. A free consultation is available and provides a great opportunity to learn how the law applies to your specific situation.