Last week I talked about the importance of selecting the person with the right skills and characteristics to fill the key roles in your estate plan.  Specifically, I talked about how to select a good Guardian.

This week the focus will be on the financial decision-makers, the Financial Power of Attorney, Trustee and Executor.  These three roles have significant overlap so, I will discuss them together, pointing out the differences as I go along. 

First, who are these people and what do they do?  A Financial Power of Attorney or Financial Agent is the person you give the authority to take care of your finances while you are alive but, unable to do so for yourself.  You can limit it to the authority to act only upon your incapacity or you can have it fully effective from the date you sign it.  If you have doubts about giving that person authority right now you probably should reconsider your selection.  Your Financial Power of Attorney should be "durable."  That means it is still valid if you become incapacitated.  The language of the document will determine whether it is "durable."  Your financial agent's power ceases upon your death.  If you have a Trust you will still need to designate a Financial Power of Attorney since the Trustee is limited to handling trust assets.  A Financial Power of Attorney could, for example, apply for government benefits on your behalf but, a Trustee cannot.  After your death your Executor and/or your Trustee will have the authority to handle your financial issues.  Your Executor will be officially recognized by the probate court upon submitting your Will for probate.  The Executor will gather up all probate assets, pay debts and give whatever is left over to the beneficiaries of your Will.  The Trustee is named in your Trust (or in your Will for a Testamentary Trust).  The Trustee's job is to gather trust assets, possibly pay debts, invest and grow trust assets and make distributions according to the Trust's instructions.  As you might have gathered, the people you select for these roles should be honest above all else.  These people should have considerable financial skills, be detail-oriented or willing to hire professional help in the form of appraisers, CPAs, attorneys and investment managers, as needed.  It is also imperative that your documents be structured to allow for the hiring of these professionals.  Do not select that person who is willing to perform brain-surgery on themselves to save a dollar.  Obviously, the people you select should be very trustworthy since they may manage finances for you if you are incapacitated or for those you hold most dear.  Clients often select the same person for all three roles.  If you do this do not forget to give a realistic look at the relationship of the person you select and the beneficiaries of your Will or Trust.  Strained relationships can totally break down under the stress of your death or incapacity.  If your trust assets are substantial a corporate trustee can be a perfect solution.  A corporate trustee is well aware of appropriate investment strategies and is familiar with distribution standards, so as to not be too tight or too loose with the purse strings.  The corporate trustee is also more likely to be impartial if you have multiple beneficiaries.  In selecting people for these three roles a good question to ask yourself is 'would I be comfortable turning over my assets for this person to manage right now?'  If the answer is 'no' you should keep looking.  

Tune in next week when I discuss selecting Health Care Agents.