One of the more difficult parts of Estate Planning can be deciding who should serve as Executor, Trustee or as an Agent under a Power of Attorney. Regardless of the size of your estate, the people you name will impact your life and your family’s future, says a CNBC article “How to get it right when naming an executor and filling other key roles in your estate plan”. A quick decision now might have a bad outcome later.
Powers of Attorney
An important estate planning decision is deciding who should serve as an Agent under a Financial or Healthcare Power of Attorney. They can be the same person or different people. Understand that the Agent appointed under a Durable Financial Power of Attorney will have complete control over your assets, including accounts, real estate, and personal property, if you are too incapacitated to make decisions or to communicate your wishes.
The Agent appointed under a Power of Attorney for Healthcare will be making medical decisions on your behalf. You will want to name a person you trust to carry out your wishes—even if they are not the same ones they would want, or if your family opposes your wishes. It’s not an easy task, so be sure to create a Living Will to express your wishes, if you are placed on life support or suffer from a terminal condition. This will help your healthcare Agent follow your wishes.
An Agent under a Financial or Healthcare Power of Attorney ONLY has authority to act on your behalf while you are alive. When you pass away, your Agent’s power expires.
What is an Executor?
In contrast to an Agent under a Power of Attorney, an Executor ONLY has authority to act after your death. They are responsible for everything from filing your last will with the court to paying off debts, closing accounts and making sure that assets in your probate estate are distributed according to the directions in your last will. They need to be trustworthy, organized, and able to manage financial decisions. They also need to be available to handle your estate, in addition to their other responsibilities.
Note that some of your assets, including retirement tax deferred accounts, life insurance proceeds and any other assets with a named beneficiary, will pass outside of your probate estate. These assets need to be identified and the custodian needs to be notified so the heir can receive the asset.
Settling an estate takes an average of 16 months, with smaller estates being settled more quickly. Larger estates, worth more than $5 million and up, can take as long as four years to settle.
What’s Special About a Trustee?
A Trustee is responsible for administering a trust, and has power and authority to act both while you are alive, and after you pass away. Many people use trust planning to avoid or minimize the cost and burden of probate. A Trustee acts as a fiduciary, meaning they have an ethical duty to act in the Principal’s best interest. They should have many of the same qualities you would want in an Agent under a Power of Attorney or an Executor – trustworthy, organized, and reliable.
Pros & Cons of Co-Agents
When deciding who should serve in these roles, some people prefer to name co-executors as a means of spreading out the responsibilities. That is fine, unless the two people have a history of not getting along, as is the case with many siblings. Sharing the duties sounds like a good idea, but it can lead to delays if the two don’t agree or can’t coordinate their estate tasks. Most experienced estate planning attorneys recommend naming one person as the executor and a second as the contingency executor, in case the first cannot serve or decides he or she does not want to take on the responsibilities. The same applies to any trustees, if your estate plan includes a trust.
Willing and Able
Make sure the people you are considering as executor, contingent executor, trustee or success or trustee are willing to take on these roles. If there is no one in your life who can take on these tasks, an option is to name an estate planning attorney, accountant, or trust company.
Keep Up With Changes
Finally, revisit your estate plan every three to five years. Life changes, laws change and your estate plan should continue to reflect your wishes. The lives of the people in key roles change, so the same person who was ready to serve as your executor today may not be five years from now. Confirm their willingness to serve every time you review your last will, just to be sure.
Contact our office today to get started.
Reference: CNBC (March 5, 2021) “How to get it right when naming an executor and filling other key roles in your estate plan”
