Question: I’m getting up there in years, age 85, and am living on my own and taking care of my own finances. My sister is named in my documents as power of attorney and trustee after my death. However, my sister is having health issues, and she is slipping, mentally. As a back up to my sister, I named a professional fiduciary.
I would like to “skip” my sister as power of attorney and trustee and go right to the professional. How is this best accomplished? The documents say that “if my sister cannot act,” then it goes to the professional. I am worried that even though she may not be in the best position to step in and help me, she may feel obliged to do so when the time comes. What is my best course of action?
Answer: When someone is named as a trustee, executor or power of attorney and it comes time for them to step in, they do, indeed, feel obligated to take on the responsibility. Some feel it is an honor to be named, to have been trusted enough to be named but, you are right, some may take on the duties despite the personal challenges the job may present.
You have a couple of ways to best address this situation. If you named the professional as a successor to your sister in your trust and power of attorney, you could ask your sister if she is willing to decline the appointment. She can sign a “declination to act” for both the trustee appointment and the power of attorney appointment. Then, the duty will fall to the professional.
You mention that the professional is named in the trust as a successor to your sister, but if the professional is not presently named in the power of attorney document, then you will need to have your attorney prepare a new power of attorney naming the professional. Either way, you should consult your attorney to get the line up of the trustee and agent the way you think best. If your sister knows you named her, you should let her know that you have made some changes. It could be that she feels relieved to know she is not “in the hot” seat.
While our loved ones may feel honored that we put our trust in them, they are not always happy to be named. I can’t tell you how many times I meet a prospective client who says, “I just finished acting as my parents’ trustee and I wouldn’t wish that job on my worst enemy!”
Question: My son and daughter will inherit my considerable estate. My son is financially sophisticated, has a good job and owns his own home. My daughter has had a “few” marriages, lives in a rented apartment, does not work and, by her own admission, has a spending problem. She is in debt and at one time considered filing for bankruptcy.
I want to give my son’s share outright to him, but I am fearful that if I hand over a large amount of money to my daughter, it may be gone in a year or two leaving her destitute. I worry she will be mad at me if I give my son his money outright and put hers in a trust for her benefit. This keeps me up at night and I would appreciate your advice.
Answer: Being sensitive to our children’s vulnerabilities and creating an estate plan to best support them is a loving act. Unfortunately, our children may not always see it this way especially if a sibling is treated differently. In this kind of situation, communication is key.
The trust you set up for your daughter can be liberally construed meaning that the trustee can fully support your daughter and make funds freely available to her but put some rails on completely depleting the funds in a few years. Finding a trustee who will establish a good relationship with your daughter so they can openly communicate about her spending and making sure she knows how much is in the trust and how long it will last at current spending rates is important. Realistically, your daughter may share your fears of ending up penniless so having her funds safeguarded may be just want she wants. Also, funds held in an irrevocable trust for her benefit are shielded from creditors.
If she is in debt now and you distribute her share outright to her, the creditors will feast on the funds. The trust is a barrier to these creditors. Have a discussion with our daughter to let her know why you want to set up the trust for her benefit. Also, introducing her to the trustee now so they can begin to establish a relationship will go far in making her more comfortable with your estate planning.
Liza Horvath has over 30 years of experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust Management Company. This is not intended to be legal or tax advice. If you have a question call (831) 646-5262 or email liza@montereytrust.com
