Trustee, Personal Representative, and Powers of Attorney

When you prepare documents nominating individuals to serve in these capacities, make sure to understand their duties and their authority.

When you nominate a person to act as your trustee, personal representative, or an agent under a power of attorney, care should be taken to place the right person in the right position that fits your specific situation. Individuals serving in these capacities make financial and healthcare decisions for you that are in your best interest. Understanding their roles, will help you avoid problems down the road.

You may wonder what authority you are giving to your agents to act on your behalf and what their specific duties are. First, these titles are not interchangeable—each has a specific role in a specific setting. If you have set up a trust, you can be the trustee of the trust or you can name another person to be the trustee. A trustee is the person who administers and carries out the provisions of the trust. If you have written a Will, your personal representative is the person you have nominated in your Will to settle and distribute your estate after you die. However, your personal representative has no authority to act, until he or she makes an application to Probate the Will and is appointed to be the personal representative by the Court.

A financial power of attorney is a document that gives your agent authority to make a wide range of financial and property decisions for you. It is a good idea to regularly review, update, and keep your power of attorney current. Banks and title companies are reluctant to accept powers of attorney that are over more than a few years old. Powers of attorney terminate when you die. Your agent can no longer act after your death to access bank accounts, etc.

Next, a healthcare power of attorney gives your agent the authority to make medical and healthcare decisions for you. A healthcare power of attorney becomes effective only if you are unable to communicate your wishes to your providers.

Here are a few examples of problems that can arise when doing this kind of planning:

Example 1: A person creates a trust, puts all her property in the trust and 30 years goes by. When she starts to decline, she names her son as her agent under a financial power of attorney. The son tries to pay her bills but discovers that he cannot access her bank account because it is in the trust, and he has no authority under the power of attorney to access the trust bank account.

Example 2: A parent creates a trust and decides not to put her bank account in the trust. When she starts to decline, the successor trustee of her trust steps in to help manage her property and pay her bills. The successor trustee discovers that the bank account was not put in the trust, so he can’t access the funds because it is outside the trust. Again, no one had authority to access the bank account or pay bills.

Example 3: A parent names her son to act as her agent under a springing power of attorney, which means that it will become effective upon some future event, usually the person’s incapacity. Per the terms of the power of attorney, the parent’s incapacity is to be determined by two doctors who would examine her and make a written statement that she is incapacitated. It can take several weeks to months to have the doctors examine a person and sign an incapacity form. In the meantime, no one can pay the bills. (I tend to discourage springing powers of attorney, unless there is a good reason to create one.)

Thus we can see, to avoid these kinds of outcomes, it is important to set up your legal documents in the way that will accomplish your specific goals. Having an attorney explain what your best options are, in the long run, can save you time and help you avoid costly mistakes.

Tom Packer is an Elder Law Attorney serving all of Southeast Idaho. As part of his law practice, Tom offers Life Care Planning to deal with the challenges created by long-term illness, disability and incapacity. If you have a question about a Senior’s legal, financial or healthcare needs, please call us.

May 2020