Understanding Roles in Estate Planning
Executor? Power of Attorney? Agent? Trustee? What is all this!!?
Over the years, we have met with many people who want to ensure that they, and their wealth, are taken care of both in the case of long-term illness or dementia, and after they pass. They often struggle with choosing the right people for the right jobs. Many have been confused about what the jobs are and when they apply.
Zone 1: LIFE – While You Are Living & Healthy
Trust: There are many kinds of trusts, to many to cover here, but one that we often see is a Revocable Trust, where you are the Trustee of your own trust while you are living. That is the easy part. You are the one with control while you are alive. Its purpose is usually to avoid taxes and to keep things private after death. It may be called a Living Trust.
Will: Your will and its executor have no effect in Zone 1. “I’m not dead yet.” –Monty Python
Power of Attorney: This named person “agent” has the authority to sign your name and transact in your best interests, as if they were you, as permitted in the POA document.
- Durable General POA. The agent for this type of POA could act if needed during Zone 1, but they are usually dormant. The primary agent is often a spouse.
- Springing POA. The agent for a springing POA would not be active as it requires a doctor or two to certify your incompetence first.
- Limited POA. These are often used for a specific purpose, like a real estate transaction where you are not going to be present. The agent can be active in Zone 1 but has very restricted powers.
Zone 2: THE GRAY ZONE - Living, but not faring well
You might have suffered trauma of some kind, or beginning to feel like you are not getting things done or are frequently forgetting to do things.
Trust: When health declines, the owner of a trust will often resign as Trustee, allowing the first successor trustee to manage the contents (assets) in the trust. This is a formal letter that should be notarized. The trust remains revocable until the death of the owner/creator.
Will: Your will and its executor have no effect in Zone 2.
Power of Attorney: Zone 2 is when having a Power of Attorney is most important. Your chosen agent is there to act in your place, on your behalf, when you cannot. They are there to protect you and your wealth while you are living. Be sure to name a backup agent, called a successor.
Zone 3: AFTER LIFE
Trust: Your trust becomes irrevocable on your death. It can no longer be changed. Your successor trustee (if you were the original trustee) becomes active and must follow the dictates of the trust. It is best to appoint two successors in case the first one cannot perform.
Will. Finally, your executor or personal representative has a role to play! They are responsible for settling your estate and making distributions as per your will. Assets titled to a trust are not controlled by a will, nor are assets with specified beneficiaries. These are distributed outside of the will and are not eligible for probate.
Again, backup agents are good to have. Try to appoint agents who are younger than you so they will be alive and healthy when you die (in theory).
Power of Attorney. Done. The powers granted to your agent end on the day you pass.
Q&A
1. Can I appoint the same person as my trustee, executor, and POA agent?
Absolutely! Just make sure to make them aware of their role and duties, and ensure they are willing to serve. You still need backup agents for all three roles.
2. How do I choose people for these roles?
While this article is about choosing your POA agent, it applies to all the roles discussed: https://papertigresspfc.com/choosing-whom-to-trust/
3. What happens if my agent dies before me?
You just never know, so it is critical to have both a successor agent appointed and to grant the power to appoint a new successor if all else fails. Often your attorney is given this job.
4. Ask us your burning questions! We have done these jobs for many who have no one in their families who can serve.
One Alternative
For those struggling to choose agents for these very important roles, Paper Tigress Personal Finance Care is insured to provide both Executor and Power of Attorney Services. We can also recommend private trustees. It can save your family a lot of time, headache, and friction by enlisting an outside agent.
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