Living Trust

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

Durable Powers of Attorney

The situation facing one family is all too common. An aunt is now incapacitated with severe Alzheimer’s disease. Her brother has been her agent with a durable power of attorney in place for many years. In the course of preparing his own estate plan, he decided it’s time for one of his own children to take on the responsibility for his sister, in addition to naming his son as executor of his estate. The aunt has no spouse or children of her own.

The answers, as explained in a recent article “Changing the agent under a durable power of attorney” from My San Antonio Life, all hinge on the language used in the aunt’s current durable power of attorney. If she used a form from the internet, the document is probably not going to make the transfer of agency easy. If she worked with an experienced estate planning attorney, chances are better the document includes language that addresses this common situation.

If the durable power of attorney included naming successor agents, then an attorney can prepare a resignation document that is attached to the durable power of attorney. The power of attorney document might read like this: “I appoint my brother Charles as agent. If Charles dies or is incapacitated or resigns, I hereby appoint my nephew, Phillip, to serve as a successor agent.”

If the aunt would make her wishes clear in the actual signed durable power of attorney, the nephew could relatively easily assume authority, when the father resigns the responsibility because the aunt pre-selected him for the role.

If there is a clause that appointed a successor agent, but the successor agent was not the nephew, the nephew does not become the agent and the aunt’s brother can’t transfer the POA. If there is no clause at all, the nephew and the father can’t make any changes.

In September 2017, there was a change to the law that required durable power of attorney documents to specifically grant such power to delegate the role to someone else. The law varies from state to state, so a local estate planning attorney needs to be asked about this issue.

If there is no provision allowing an agent to name a successor agent, the nephew and father cannot make the change.

Another avenue to consider: did the aunt’s estate planning attorney include a provision that allows the durable power of attorney to establish a living trust to benefit the aunt and to transfer assets into the trust? Part of creating a trust is determining who will serve as a trustee, or manager, of the trust. If such a clause exists in the durable power of attorney and the father uses it to establish and fund a trust, he can then name his son, the nephew, as the trustee.

Taking this step would place all of the aunt’s assets under the nephew’s control. He would still not be the aunt’s agent under her power of attorney. Responsibility for certain tasks, like filing the aunt’s income taxes, will still be the responsibility of the durable power of attorney.

If her durable power of attorney does not include establishing a living trust, the most likely course is the father will need to resign as agent and the nephew will need to file in court to become the aunt’s guardian. This is a time-consuming and slow-paced process, where the court will become heavily involved with supervision and regular reporting. It is the worst possible option, but it may also be the only option.

If your family is facing this type of situation, begin by speaking with an experienced estate planning attorney to find out what options exist in your state, and it might be resolved.

Reference: My San Antonio Life (Jan. 25, 2021) “Changing the agent under a durable power of attorney”

Control of Assets and Trusts

Control of assets is a key issue in deciding on a trust.  Any trust created while the person, known as the “grantor,” is living, is known as a “living trust.” However, the term is also used interchangeably with “revocable trusts,” which can be changed according to the grantor’s wishes. During the lifetime of the grantor, as explained in the recent article “Control of Assets a Key Issue in Deciding on a Trust” from FED Week, that person can be the trustee as well as the beneficiary. Control is retained over the trust and the assets it contains.

Trusts are used in estate plans as a way to avoid probate. Equally importantly, they can provide for an easier transition if the grantor becomes incapacitated. The co-trustee or successor trustee steps in to manage and control assets, and the process is relatively seamless. The family, in most cases, will not have to apply for conservatorship, an expensive and sometimes unnerving process. Within the privacy afforded a trust, the management and control of assets is far less stressful, assuming that the trust has been funded and all assets have been placed properly within the trust beforehand.

Naming a successor trustee so the grantor may remain in control during his or her lifetime is an easier concept for most people. However, adding a co-trustee rather than a successor may be a wiser move. A successor trustee requires the grantor, if still living, to formally resign and allow the successor trustee to take control of the trust and its assets.

If a co-trustee is named, he or she may step into control instantly, if the grantor becomes incapacitated.

Trusts fall into two basic categories:

Irrevocable Trusts—A permanent arrangement in which assets going into the trust are out of control of anyone but the trustee. Giving up this control comes with benefits: the assets within the trust may not be tapped by creditors and they are not considered part of the estate, also lowering tax liability. Irrevocable trusts are generally used to protect loved ones, who are named as beneficiaries.

Revocable Trusts—The grantor retains control of assets and may collect investment income from assets in the trust. If the grantor decides to have the assets back in his or her personal accounts, they can be reclaimed into his or her own name.

The revocable trust protects the grantor against incapacity, as the successor trustee or co-trustee can take over management of trust assets and assets pass to designated recipients without having to go through probate.

Determining which of these trusts is best for your family depends on many different factors, including control of assets.

Speak with an experienced estate planning attorney to learn how trusts might work within your unique estate plan.

Reference: FED Week (Jan. 21, 2021) “Control of Assets a Key Issue in Deciding on a Trust”