Selecting a Power of Attorney, Trustee and or Executor of your estate can be one of the most important aspects of your Estate Plan. The person you select in one of these positions will have control over your assets if you become incapacitated, and or upon your passing when your estate is distributed to your heirs. As you meet with family and friends, consider who would make the best person to perform the tasks of Power of Attorney, Trustee or Executor of your estate (conservatorships will not be covered in this article).
This article will cover the responsibilities of your Power of Attorney, Trustee and or Executor of your estate, what to look for when selecting persons in these various positions and the liability for misconduct in providing services in any of these fiduciary roles.
Responsibilities of Power of Attorneys, Trustees and Executors
Power of Attorney
The person you select as a Power of Attorney will be responsible for managing your assets, paying your bills, and managing your business dealings if you should become incapacitated. Basically, this person acts in your stead when it comes to your finances. Some of the more important aspects of being a Power of Attorney are: access to your bank accounts, buying, selling or encumbering your property, and litigating cases on your behalf.
Executor and Trustee
A Trustee and Executor have very similar roles. They are the persons you appoint to manage your estate after you pass away. They also have very similar responsibilities as a Power of Attorney, since they will manage your finances upon your passing. A Trustee and or Executor will have the responsibility of, managing, and distributing your assets to your desired beneficiaries upon your passing. Similar to a Power of Attorney, a trustee has the duty to pay your bills, and properly manage all of your investments.
A Power of Attorney, Trustee, and Executor have substantial powers, and appointing a person to act in any of these capacities should be done with great thought and care.
Some things to look for when selecting a Durable Power of Attorney, Trustee and Executor
1. Person’s expertise in handling financial matters. You want to make sure you have someone who is experienced in handling financial transactions in both their business and personal lives. Particularly, if you have a larger estate, you want to choose someone who has expertise in investments and who has other experts available as resources, such as lawyers, accountants, and tax professionals.
2. Family Members. If you are selecting a family member, select someone who can get along with all family members. You can avoid litigation, costly delays in distributing assets to your beneficiaries and heirs and prevent unnecessary and costly will and trust contests. Selecting a family member or close friend that gets along with everyone prevents your beneficiaries from spending more money on unnecessary attorney’s fees and court costs.
3. Selecting a professional fiduciary. When choosing a Power of Attorney, Executor, or Trustee, a professional may be the best route. I would recommend a professional fiduciary if you have a large estate, even though you will likely need to pay a fee for the professional fiduciary’s services. An experienced professional has the skills to manage complex estate plans, and has resources readily available to resolve tax problems or other issues. A professional fiduciary has no familial connection to you, so it lessens the likelihood and number of disputes and litigation. A professional fiduciary is also required to carry a bond as insurance; if the professional fiduciary is found to have misappropriated your estate assets, it can be recouped quickly. Many professional fiduciaries have extensive financial management experience, investment experience, and experience with dealing with family problems.
Liability for Mismanagement of Estate Assets
If you appoint a family member who does not have the financial expertise required to administer your estate properly and instead mismanages your estate or account, they can be sued personally. In addition, they can be held criminally liable for fraud. I previously had a Client who chose to appoint a family member as Trustee of their estate based on the fact that the proposed Trustee was the oldest child. Although honorable, this was not the best thing for the Client. The Client passed, and the Trustee was sued for Breach of Fiduciary Duty for mismanaging their deceased parents’ assets. The Trustee was not a “bad” person, just inexperienced in handling such complex financial matters. If you know this person does not have the capacity and or willingness to handle complex financial transactions, you should not appoint them as they can be sued, and even jailed for mismanagement of your assets.
When selecting a fiduciary, look at the persons’ and or entities track record and expertise for handling financial transactions, as well as their ability to manage potential family disputes.
For further questions regarding selecting a Power of Attorney, Trustee or Executor, please contact VDG Law at (510) 479-0768.
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