Think of the core of your estate plan as having two spheres. There’s the sphere that authorizes trusted family members or friends to step in during your lifetime, during any period of incapacity. You would authorize them to speak with health care professionals regarding your health, and you would allow them to make decisions for you. You would also authorize them to handle financial matters for you, such as writing checks on your account, making sure you withdraw your required minimum distributions from your retirement accounts, sign your income tax return, pay your property tax, and handle a number of additional tasks of a financial nature.
We call persons who are authorized to handle your financial matters “fiduciaries”. You will most likely have several fiduciaries in your estate plan. There are the financial agents named on your power of attorney, then there are your trustees, if you have a trust, and your Personal Representatives, also known as Executors, named in your Last Will and Testament. In their role as your fiduciary, they owe you a duty of care and a duty of loyalty. That means they need to protect your property and they need to act in your best interest.
I have found that clients are easily confused by all the terminology for these fiduciaries. If you think about the reason for the various names of your fiduciaries, think about the area of law that governs their actions. Your financial agents named in your financial power of attorney, act under agency law. Your Personal Representatives or Executors, act under probate laws. Your Trustees act under trust law. These are distinct areas of law, each with its own vocabulary.
Your child may be your financial agent under your power of attorney, as well as named in your Will as your Personal Representative, and they may also be your successor trustee. There is a way to look at all of these roles through the lens of time. Your financial agents will help you first, while you are alive and incapacitated (if ever). If you have a revocable trust, your successor trustee named to act during your lifetime would handle the property you added to your revocable trust (most likely your home and your non-retirement investments). Later on, after your death, the Personal Representative name in your Will steps in and the financial agent under the power of attorney ceases to have authority to act. Powers of attorney end at death. After your death, the successor trustee named for that time takes over the administration of your trust property.
The second sphere of your estate plan addresses the distribution of your property after your death. The documents used for that purpose are a Will and possibly trusts.
To develop you estate plan, including at the minimum your Will, Advance Healthcare Directive, and Financial Powers of Attorney, we guide you through a process that begins with an initial conversation to determine your goals, wishes and concerns. Following that meeting we prepare a first set of drafts that we review with you. That allows us to point out how the documents work, where they can be customized and address your questions. We update the drafts after each conversation and continue to review until you feel comfortable. At the signing, we assist with any retitling of assets, updates to beneficiary designations and transfers of real estate by deed. You will have ample time to talk with others in your family to confirm that they are available to be your fiduciaries and healthcare agents, and to learn how your documents will work when needed. After the signing, we offer a family meeting. You can include anyone you wish to include, and we will give them a high-level view of your plan. That gives those who care about you peace of mind. They will know you have prepared and made your decisions. You can preserve harmony in the family by making your decisions and letting your loved ones know how you think about important matters such as end of life healthcare matters that relate to the quality of your life, and the distribution of your assets.
