Before you add to your estate planning documents the names of the people you want to carry out your wishes, consider these tips.
Death and incapacity are hard topics to discuss and even more difficult to plan for. We would like to think the good times will go on forever. However, we know that is not reality. To help with the challenging decisions of who to choose to represent us, here are some estate planning tips.
Both death and incapacity, to some extent, will reach many of us at some point in our lives. Therefore, we need to make the appropriate preparations, which entails completing our estate planning documents. The most common and important documents are the last will and testament or trust, power of attorney and health care directive. For my clients, one of the most difficult parts of the process is selecting the correct representative to serve in each role. Below are some considerations to take when selecting representatives to each of these positions.
Power of Attorney
As we grow older, we become less able to manage our own affairs. A power of attorney appoints a representative(s) to handle our affairs for us on a broad scale. It is a very powerful document, and the obvious primary concern is appointing someone you trust. Remember, most likely you will not be completely competent when it is necessary to use this document, so appointing an individual(s) you trust is paramount.
It is also advisable to select someone who lives in close proximity to you. Handling someone’s affairs from a distance can be difficult. It is really a hands-on experience, so if you can appoint someone close to you, that would make the job easier and more effective.
Finally, clients may appoint more than one agent (co-agents) who can act independently of one another. There is a lot of work that is involved in managing a person’s affairs. It might be too much for one person who also has their own life to manage. I find it works better if the work is spread out among multiple people so not any one person feels too overwhelmed.
Health Care Directive
This document appoints someone to make a medical decision for you if you are unable to do so yourself. Most everyone appoints their spouse as the primary person to make that decision.
The real question becomes who to appoint as the successor representative(s). If you are fortunate enough to have a person in the health care field as a family member, then the choice may be an easy one. For the less fortunate, it should be a compassionate person with the skills necessary to be able to discuss your situation with treating physicians and make the right decision on your behalf.
Personal Representatives and Trustees
Most likely a spouse will be the primary appointment, whether that be as a personal representative under a will or a trustee of a trust. It is always advisable to consider an alternate choice.
If you are a high-net-worth individual and have a more sophisticated estate plan, you might want to consider the services of an independent fiduciary, such as those provided by a bank or other trust advisory institution.
Distance or proximity to you or your home should not be a factor. Today, out-of-state agents can operate just as easily as in-state alternatives. A majority of probate and trust administration can be handled electronically, so physical presence in the state of the decedent is not necessary.
You need to select an individual who not only has the aptitude, but the time to perform the administration that you are going to require. Time is a key factor because there is a significant amount of work involved in every estate.
Finally, since most estates involve handling money and assets to a certain extent, you must appoint someone with the morals to fairly carry out your objectives.
There are unique characteristics to consider when selecting a representative(s) for the different roles outlined above. It is imperative to select the right agent that fits each unique position. They may be the same person or different people as your situation dictates. Keep the above factors in mind when making your decision, and you will be on the right track.