Powers of Attorney and Trusts are two frequently used estate planning instruments. One of the most difficult decisions to make in relation to the drafting of a Power of Attorney or Trust as part of an estate plan is who shall handle your personal and financial decisions. This article is meant to provide ideas to guide this important decision.
A Power of Attorney is a legal document that allows you to officially designate someone as your attorney-in-fact. Your attorney-in-fact can handle financial and legal matters on your behalf in the event that you become physically or mentally incapacitated and their ability to act terminates upon your death. With an attorney-in-fact, you never know when the need for someone to have the capability to act on your behalf will arise. An attorney-in-fact may only need to pay bills for a short period of time or may need to make key financial decisions.
A Trust is a legal document which specifies how trust assets will be managed by a trustee. A trustee is named in a trust agreement and is authorized to carry out your objectives as written under the express terms of the trust. A trustee’s obligation to act can begin upon your death, or at a time when you may be unable to unwilling or unable to act as trustee. With a trustee, they will be called upon to carry out your wishes typically over a much longer period of time. Attorneys-in-fact and trustees are fiduciaries, or people who are legally obligated to act in your interests.
The following topics (covered in the full article) are considerations to keep in mind when making the decision of whom to appoint as your fiduciary.
- Your fiduciary should be someone who knows and understands your wishes, someone you trust to act in your best interests and those of your beneficiaries, and someone who is qualified to make decisions in such a position.
- Choosing someone with expertise is necessary only if your financial assets involve a specific business.
- Because your fiduciary will conduct regular banking and other financial and legal transactions, consider choosing someone who lives close to you.
- Make sure your fiduciary will be available to act.
- We are often asked about appointing co-fiduciaries.
- While it is understandable to look first to a family member to serve as fiduciary, there are circumstances for which a corporate fiduciary such as a banking institution or investment firm is the best choice.
- Your thoughts about an appropriate fiduciary may change over time.
