One of the most important aspects of your estate plan is your fiduciaries. Fiduciaries are the people you appoint to act on your behalf. Your estate plan may include some or all of the following: Personal Representative (also known as an executor),guardian for your minor children, healthcare agent, financial power of attorney, or trustee. Each person has a specific role with different responsibilities, and choosing the right people for each role is important. However, many of our clients struggle with this. Last week, in part one of this series, we covered what to consider when choosing your personal representative and guardian for your children. This week, we’ll discuss how to choose the right healthcare agent, power of attorney, and trustee.
Healthcare Agent
Your healthcare agent is the person you appoint to make healthcare decisions for you if you can’t. Usually this occurs because you are unconscious, unable to communicate, or incapacitated due to an illness such as dementia or Alzheimer’s. When deciding who to choose for this role, you’ll want to name someone you are confident will carry out your wishes, and not allow their own personal emotions or beliefs to influence their decisions. In many cases, people name their spouse as their first choice, followed by their adult children or another family member or close friend. Some people feel that naming their children is too much of a burden, so they choose other people, but still require their agents to consult with their adult children prior to making any final decisions. There’s no right or wrong way to do this, just make sure that you discuss your wishes with anyone you name as a potential agent so they are clear about what you would want them to do if they were called on to act.
Power of Attorney (also known as Attorney in Fact)
Your Power of Attorney is the person who can act on your behalf for all things non-medical. Unlike your healthcare agent, in many cases your Power of Attorney will be able to act for you whether you are incapacitated or not. (If you don’t want your Power of Attorney to be effective unless you are incapacitated, be sure to talk to an attorney to make sure you have it set up properly.) Some of the common powers given to your agent in a power of attorney include:
- Managing bank accounts
- Handling real estate transactions
- Hiring or firing professionals
- Handling your business affairs
- Entering into contracts on your behalf.
Because your Attorney-in-Fact can perform any legal function granted within the document just as you can, it’s extremely important to choose someone you trust completely. We also generally recommend that you don’t give copies of your Power of Attorney to your agent unless you need them to use it. This will reduce the risk of unauthorized use by your agent.
Trustee/Successor Trustee
If your estate plan includes a trust (there are several types of trusts and ways they may be incorporated into your estate plan), your trustee will be responsible for managing the trust assets and distributing them to your beneficiaries as instructed in your estate plan. When considering a successor trustee, you may want to consider someone who would make decisions similar to those you would make if you were able. For example, if your successor trustee will be managing a trust for your adult children, what kinds of things would you be willing to give your kids money for outside of the common categories of health, education, maintenance and support? Would that include money to pay for a wedding, a business start up, or a new house?
It’s also helpful to keep in mind that your trustee doesn’t need to be an expert in the law or financial investing. They can (and in most cases should) hire experts as needed to help them with their duties. The trustee’s primary responsibility is protecting and preserving assets for the beneficiaries, so making sure they are willing to get help if they need it is a must.
While there’s no right or wrong way to choose your agents, you want to ensure the people you choose understand their role and responsibilities and are willing to accept them. If you have questions about who to choose, or how to ask someone to fill a certain role, please schedule a free 15 minute consultation. We’re happy to chat.