There’s a whole lot of vocabulary that comes with estate plans, like agent, personal representative and trustee. Today, I’m gonna break down who some of the key terms. All of the terms discussed today are roles that people or organizations fill in your estate plan. This newsletter will cover what each role does and when they (usually) step in.
Personal Representative
You nominate your personal representative in your Will. Their primary job is to administer your estate on your death. This role is also often known as an “executor.” Your personal representative does not do anything until you die. And, even after you die, depending on how your estate plan is set up, they might not do much anyways.
While you nominate the personal representative in the will, the Court has to appoint the personal representative before they are actually able to serve. After appointment, the personal representative’s job is to collect assets that are subject to probate, notify and pay off creditors, and then distribute assets according to the Will. This is an over simplification, of course. Between being appointed and distributing assets, the personal representative has a host of other tasks. But, that’s the gist of the job.
Now, not everybody dies with assets subject to probate. If all of the assets are jointly owned, have beneficiary designations, or are in a trust then the estate doesn’t have any probate-able assets. If that’s the case, the personal representative may not need to do much at all.
Healthcare Agent
Your healthcare agent is the person or organization that you have named to make healthcare decisions on your behalf in the event you are unable to make them for yourself. You name your healthcare agent in your healthcare power of attorney.
Your healthcare agent can make decisions related to healthcare. This may include decisions about removing or continuing life sustaining treatment, decisions around medication management, consenting to surgeries, decisions about visitation and more. Some agents under healthcare powers of attorney are able to make decisions about where you are living. Some agents have additional authority to consent to mental health treatment. If you’re curious about what powers you have granted your agent, read through your healthcare power of attorney.
Generally, the authority granted to a healthcare agent dies with you, meaning your agent’s job ceases on your death. But, there is one after-death job that could fall to the healthcare agent. The healthcare agent is second in line for the duty for providing funeral and disposition arrangements for a dead person under Arizona law. The spouse is first in line, if you were curious. This means that if you die unmarried or your spouse is unavailable to make final arrangements for you, that responsibility might fall to your healthcare agent.
Financial Agent
Your financial agent is the person or organization that you have named to make financial decisions on your behalf in the event you are incapacitated and unable to make financial decisions for yourself. The financial agent is named in your financial power of attorney.
Depending on the type of financial power of attorney you have, your agent may be able to act on your behalf as soon as you sign. If the power of attorney is not immediately effective, your agent may have to prove your incapacity with some sort of doctor’s letter to before being able to use the document. The powers of a financial agent are listed in the document itself. So, if your curious what your agent can do, read the document. Some common powers for a financial agent include: managing investment accounts, paying bills, buying and selling real estate, filing tax returns, and much more.
One important thing- your financial agent does not have authority to handle assets in your trust. That’s your trustee! So, for example, let’s say you title your house to the trust. Even if your agent has the authority to sell real estate, he can’t sell the house because it’s a trust asset. Your trustee might be able to though!
The authority granted to a financial agent dies with you. Once the financial agent learns of your death, they no longer have authority to act (for the most part).
Trustee
Like I alluded to above, your trustee has the power to manage trust assets. And, the trustee manages trust assets both during your lifetime and after your death.
If you set up a revocable living trust, it is likely that you are named as your own trustee initially. As trustee, you manage trust assets. You can do things like buy and sell real estate, make payments from trust assets, invest trust funds and more. The powers are similar to those in a financial power of attorney. In fact, there is probably a whole section of your trust that lists all of the powers a trustee has while serving.
If you become incapacitated, your trust likely names a successor trustee who would step into the Trustee role to continue to manage your assets for your benefit. This new trustee probably has most of the same powers of the original trustee, if not all of them.
On your death, the trust will direct the trustee what to do with trust assets. Often times the duties of a trustee include notifying beneficiaries, collecting trust assets, paying off creditors, and making distributions or continuing to hold assets in trust. The trustee may also need to provide beneficiaries with a report of trust property and/or file taxes on behalf of the trust. This is once again and oversimplification and just a taste of the types of things a trustee may do.
Also, if you want to learn more about the key players in a trust, read more in this newsletter.
So how do they work together?
Clients often wonder how all of these different roles work together. Usually it goes something like this.
No trust: You manage your assets and make your own healthcare decisions while you have capacity. If you become incapacitated, your agents step in. Your healthcare agent makes healthcare decisions for you. Your financial agent starts handling your finances for your benefit. These two work together. For example, if you need inhome care, your healthcare agent might pick out the caregiver and your financial agent will make sure they get paid. On your death, your health care agent might make the decision about final arrangements if you are unmarried. Then, the agents don’t have authority any more and the personal representative steps in to administer the estate.
Trust: If you have a Trust, it might look a little different. You manage your assets (including trust assets) and make your own healthcare decisions while you have capacity. If you become incapacitated, your agents and successor trustee step in. Your healthcare agent makes healthcare decisions for you. The financial agent starts handling your assets in your name for your benefit. Your trustee starts handling your trust assets for your benefit. They all work together. Your financial power of attorney might start transferring assets to the trust to be managed by the Trustee. They may also handle assets that need to stay outside the trust like retirement accounts.
When you die, if you are unmarried, your healthcare agent might make a decision about your final arrangements. Then, the agents don’t have authority any more. The trustee will administer the trust estate according to the terms of the trust. If almost everything is titled to the trust, there may be little for the personal representative to do.
