Estate Planning Who To Involve Estate Planning Who To Involve

Business Planning

Four Key Roles In Estate Plans That Work

By Jarrod Musick, Client Wealth Strategist, CFP®

"To be trusted is a greater compliment than to be loved." - George MacDonald

When we are thinking about creating or updating estate plans, we think about the people involved. Our families who need the plan to ensure their lives continue on. Key professionals like our attorney and CPA who we rely on to make sure the plan actually works when needed. We think about ourselves as we are either incapacitated or dead if these plans need to be used. But the people who usually come up last in our thinking are those we lean on to carry out our wishes. Our powers of attorney, trustees, and guardians will make or break our plans.

There are four key roles that need to be filled in your estate plan

  1. General or Limited Power of Attorney
  2. Medical Power of Attorney
  3. Trustee
  4. Guardian

Power of Attorney

Your Power of Attorney or POA can be created in a variety of ways but generally they fall into two categories, the full and the limited. A full power of attorney is usually granted to a spouse or partner in the event of your death or incapacity and allows them to legally act as you in everything. So they can make financial decisions for all of your assets and make major changes as needed. You typically don’t grant a full POA during your lifetime but will instead grant a variety of limited POAs for specific needs. You set the limits on the POA but they can be in place to make specific types of financial decisions or undertake specific actions like fixing clerical errors in contracts. In most cases you will have a financial power of attorney that grants authority to someone else if you are temporarily incapacitated and these are usually triggered when the incapacity occurs.

When you are thinking about appointing someone as your POA, selecting someone with high integrity who has the ability to undertake the responsibility of the specific situation you need them for is important. This person may be part of your family or they may not, the skills you need should take priority when making your choice.

TL;DR - A POA empowers someone else to make legally binding decisions for you, choose carefully.

Medical Power of Attorney

A medical POA is a form of limited POA and the limit is that the power you are granting is specific to oversight of your medical care. We break this out separately because it is a very important person to select. Your medical power of attorney should be someone who is able to make decisions under emotional strain and having some medical knowledge can also be helpful. Many times this person is making decisions when you have had a sudden injury or serious illness and they have had little time to prepare for what they are asked to do. Someone who is cool under pressure and strain is usually a great choice.

TL;DR - Choose someone who remains calm when others are losing their cool.

Trustee

A trustee is often similar to an executor of a will in that they are asked to implement the rules of a legal document as written. In the case of a trust this person is asked to oversee assets, distributions, and various other requirements specific to your trust. As we continue to beat the same drum, look for someone with the skills to do what you need for your specific trust. A complex family trust that is charged with overseeing the ongoing operation of several businesses is a vastly different task than overseeing liquid assets for a minor child. Trustees can also be compensated for their work if the task is significant.

TL;DR - A trustee’s role is unique to the specific trust, choose one that can do what you need.

Guardian

A guardian may be the most emotional choice you make in your estate plan. They will be the person who takes care of your child. Choosing someone who will love your child as you do and who will raise them how you want them to be raised is a very difficult choice to make. Be sure to think about where your choice for guardian will live and where you want your child to be as this can be a sensitive area beyond just thinking about who the best caregiver will be. Your guardian and the trustee for your child’s assets are not usually the same person so be sure to think about how they will or won’t be able to work together for your child.

TL;DR - A difficult choice but maybe the most important one you make.

One last but not so minor point, before you write all these people into your plan be sure to ask them whether they are willing to serve in the role you would like to have them in. They can always decline if they feel that they don’t have the time or the skills needed, but it is important to make sure that you are in agreement before writing them in.

Estate planning is never a project that we look forward to, but doing it correctly keeps you and your family protected whatever may come.

Important note and disclosure: This article is intended to be informational in nature; it should not be used as the basis for investment decisions. You should seek the advice of an investment professional who understands your particular situation before making any decisions. Investments are subject to risks, including loss of principal. Past returns are not indicative of future results.


Jarrod Musick

CFP®

Posted: 11/20/2020

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