Simplifying the Roles in Your Estate Plan : Power of Attorney, Executor, and Trustee

Estate planning can feel complicated. 

Wills, trusts, probate, executors, trustees…the list goes on and on.  But here’s a trick: You can think of estate planning as nothing more than setting up a system of “buckets” for your financial life.

Depending on your specific situation, you may have just one—or many—of these buckets. You’ll need to designate who will be assigned to the various roles in handling the assets in each bucket once you are no longer able to do so.

We often help clients clear up confusion around who is responsible for what in estate planning. For example, one common misperception we often hear is that a power of attorney (POA) is in charge of overseeing everything for a person, even after the individual passes away.  This is not the case.

If you understand the basics (the “buckets”, along with the differences in roles relating to them), you’ll help ensure that your estate plan not only functions the way you intend, but that it is handled by those who are best suited to do so.

FAQs

Here are some of the frequently asked questions our clients often have:

Q:  “What are the “buckets” in an estate plan?”

A:   Your estate and (possibly) your trust(s).

• Estate Bucket: Everyone will have at least one bucket, which represents their estate.
  • Your estate bucket includes assets which are in your individual name. Examples of this are your home, your car, or possessions in your home.
    
• Trust Bucket: Depending upon your estate plan, you may create other buckets, one of which may be a trust. 
  • A trust is nothing more than a legal bucket into which you place some or all of your assets, for your or others’ benefit.  To place an asset in this bucket, the title (ownership) has to be in the name of the Trust.  Titling is important. 
  • A trust document specifies who the trustee is, as well as rules regarding how the trustee should administer the trust assets.
  • An asset only moves into the trust bucket if you change the asset’s ownership to the name of the trust.

Q:   “Who can oversee the “buckets” in an estate plan?”

A:    A power of attorney (POA), executor, or trustee.

• Power of Attorney (POA): A POA serves as your agent to make decisions for you while you are alive.
  
  Generally, there are two types of POA: healthcare and financial/property. These are two different roles and can have different people appointed to act. Rules vary from state to state.
  • Depending upon how your documents are drafted, your healthcare POA can act for you immediately (perhaps in an emergency) or only upon certain events, such as your incapacitation. 
  • A financial POA provides control over assets in the estate bucket.
  • A POA’s authority ends when you die (for example, your IRA would be covered by your POA for Property if necessary).
    
• Executor: An executor is named in your will, and is responsible for settling your estate bucket after you pass away.
  • An executor’s duties include collecting assets in your name individually and distributing assets, filing final tax returns, and preparing accountings as needed for probate, if applicable. 
• Trustee:If you create a trust, a trustee is needed to administer that trust in the best interest of all beneficiaries.
  • If you are your initial trustee, a successor trustee steps into the trustee role if you become incapacitated or pass away. 
  • A trustee is responsible for the trust bucket only. 
  • A POA does not control the trust bucket.  The trustee or successor trustee does.

Contact us today with any of your financial or estate planning questions.