When planning your estate, you will inevitably come across (and be asked to appoint someone as) one, if not all, of the following positions: executor, trustee, and agent. To make the right decision, you need to understand the differences between these roles.
Your agent is the person you designate to make financial and healthcare-related decisions on your behalf when you are unable to do so. As part of your estate plan, you will typically complete two Power of Attorney documents: one to appoint your agent for financial matters, and the other to appoint your agent for healthcare-related matters. You may appoint the same person or different people for those roles.
Unless you limit your agent’s authority, he will have broad power to handle your property, to make any health care decision, and to exercise any right and power regarding your care, custody, and treatment that you could have made and exercised. In fact, under most general powers of attorney, your agent will have the power to sell or otherwise dispose of your property without advance notice to you or approval by you. Accordingly, you must ensure that the person you appoint is someone you can trust who will make decisions in your best interest.
Subject to your right to limit or revoke your agent’s authority, your agent may exercise the powers given throughout your lifetime, even after you become incapacitated. At your death, your agent’s authority terminates.
Your executor is the person you appoint in your Last Will and Testament to manage your estate at your death. It is your executor’s job to offer your Will for probate; identify, gather and protect your assets; pay all debts (including taxes); and distribute the balance in accordance with the terms of your Will. In Pennsylvania, your executor conducts the estate administration with considerable autonomy, but is ultimately subject to some degree of court authority and supervision. Executors who mismanage an estate can be subject to personal liability, so it is generally advisable for an executor to obtain advice and assistance from an experienced and knowledgeable estate-planning attorney.
The optimal estate plan for you may include a trust, whether a so-called “living trust” or a testamentary trust. If so, you will need to appoint a trustee. As you may know, a trust is a legal entity that can own property (e.g., real estate, stocks, bonds, and bank accounts). You can think of it as a box in which you place assets, along with a set of instructions for how, when, and for what purposes the assets may be removed. Of course, the trust assets are not actually placed in a box. The “box” is typically a brokerage account or a bank account where the funds are invested.
The person responsible for managing the trust assets and following your instructions is your trustee. Your trustee will invest the assets in such a manner as to ensure they are preserved and productive for current and future beneficiaries; and make distributions to the beneficiaries you select, in such amounts and at such times as you direct.
Who to Select?
The selection of an agent, executor, or trustee is one of the most important decisions you will make when planning your estate. In most cases, your spouse or an adult child will be preferable. However, that is not always the case. Sometimes, you may be better suited naming a friend, accountant, lawyer, or a corporate fiduciary. When selecting an individual, ensure he or she is someone who is:
- meticulous about keeping records;
- reliable and trustworthy;
- available and willing to serve;
- financially savvy;
- capable of resolving conflicts; and
- well-informed of your wishes and goals.
If you have any questions about naming an agent, executor, or trustee, or the estate planning process in general, please feel free to contact us at MFDD. We would be happy to assist with your estate planning goals.