Who To Choose

When a single person or a married couple decide to do estate planning, or asset protection planning, a key question is who to name as an Executor, Trustee, Power of Attorney, and Healthcare decision maker, called the Healthcare Representative. Let’s look at a typical married couple with children. Assume both are healthy and middle aged and their kids have no medical problems. They need standard powers of attorney so that each of them can sign for the other. But any older couple must consider that if one of them becomes incapable, or dies, a backup power of attorney is needed. That backup must have good judgment, be fair minded, and have the ability to handle financial matters. Let’s face it, some adult children simply do not have good financial skills or judgment. And in rare cases, they would not be fair to their siblings. That child should not be given a power of attorney, because finances could be mismanaged or siblings shortchanged. So the parents should choose as backup, children who are capable of handling the parents financial affairs, who have the parents’ welfare at heart, and who will treat their siblings fairly. If two or more children are to act, it should only be done if they would be cooperative.

When it comes to naming a health care agent, different considerations arise. Normally the spouse is preferred. But if the spouses are very elderly, one could die, and become incapable of making end of life decisions, so choosing a child may be wiser. It’s a bit of humor among lawyers that if there is a nurse in the family, the parents always choose the nurse, because nurses are less afraid to pull the plug. This gallows humor arises because sometimes these decisions can be difficult. When I was decision maker for my mother many years ago, and she was found unconscious at home, she was rushed to the hospital and put on life support, and given every antibiotic known. After five days, the doctors had a conference with me and my brother and sister. She had not shown any improvement in mental or physical functions and I, my sister and brother were all in agreement that she never would have wanted to live as a vegetable. At the conference, four different doctors spoke and the first three all recommended stopping life support. The last doctor, who was in charge of the medications spoke and said, “well, the outside time period of the antibiotics to have effect is 7 days, but I would not disagree with the decision to terminate.” That very narrow ray of hope made me decide to wait. The next morning I went to the room where mom was on life support. The respirator was making its sounds and I said loudly, “Mom, can you hear me?” several times. Then I shook the bedrails and repeated, “Mom, can you hear me?” She opened an eye. I said, “if you hear me, blink.” She blinked. To make a long story short, she almost fully recovered and lived another 5 years of a good life at home.

The considerations for executor of a will are somewhat like that for a power of attorney. Reasonable financial ability and diligence are the guides. Since a probate court oversees the actions of the executor there are less concerns that actions of the executor could harm the others. But good judgment is still important if there is real estate to sell or a lot of personal property that more than one heir wants. I still remember one big estate where all the money was divided to the penny, but the five nieces and nephews would not agree on who got what personal property. I devised a plan that they would draw numbers, and the first person chose an item, the second another item, etc., until every stick of furniture and trinkets were taken. It worked. If they had not agreed, all the personal property would have been sold at an auction house, which was the incentive for them to draw numbers.

A third tool used many times in estate planning is a trust. There are many kinds of trusts, revocable and irrevocable, as one size does not fit all. Some are to avoid probate. Some reduce or eliminate taxes. Some protect property from the cost of long term care. The very work “trust” partially conveys the meaning of the document which is to trust someone to handle assets for the person who makes the trust. On some trusts, a family member is all that is needed. But for certain asset protection trusts, an independent trustee (not a beneficiary) is required to avoid income tax consequences. That trustee can be a bank that does trust work, a person who is not a beneficiary, or an attorney experienced in trust work.

As always, good financial sense, and the understanding that advice of an attorney, an accountant, and a financial planner may be needed to maximize asset protections and reduce taxes to the minimum. Who is chosen for any of these roles can be as important as what the document says. Choose carefully and wisely.