Whom to Trust: Choosing an Executor or Trustee, Agent for Health Care or Attorney-in-Fact for Property Management
1. Choose a person you trust. An executor, trustee, or attorney-in-fact will have control of your property. You need to choose someone whom you believe to be honest and whose financial judgment you respect. An agent for health care decisions will literally hold the power of life and death in extreme circumstances, but may also need to make less dramatic decisions for you that will still have long term consequences.
2. For property decisions, choose a person who is good with paperwork. An executor, trustee or attorney-in-fact acquires certain powers over your property but at a price. The law requires that person to carefully account for the property he or she controls and if that person has trouble responding to a request for an account, he or she may be held personally liable for any property that is missing. For this reason it is unfair to the person nominated and creates a risk of higher attorney or accounting fees for your estate if you nominate a person who finds paperwork difficult. A person who reconciles their own bank statement or prepares their own income taxes is often more suited to be trustee than one who prefers the “shoe box” approach to record keeping.
3. Choose a person your beneficiaries / family / friends will respect and cooperate with. Depending on your estate plan, the person you nominate may be required to control assets for the benefit of others over a number of years. If there is hostility or other impediments to the nominee working with your beneficiaries, your estate plan may be frustrated. Your agent for health care will be in a particularly difficult position when it comes to end-of-life care decisions if your agent is not on good terms with your family and immediate friends.
4. Try to avoid a conflict of interest. If you are naming an individual rather than an institutional executor or trustee (e.g. bank or trust company), consider whether that person would hold another interest in regard to your estate. Does that person owe you money? Is that person also a beneficiary but not the sole beneficiary?
5. Consider a Neutral. For some families, the management skills and neutrality of a private professional trustee or corporate trustee, serving alone or as a co-trustee, will resolve many concerns. If you have a strong relationship with one financial institution, you may wish to inquire about their trust services. Ask friends who have experienced neutral fiduciaries for
referrals to those providing good service. You may wish to nominate a neutral in your initial trust documents. However, financial institutions change regularly as do those private professionals working in your area. If you elect to name a neutral successor trustee, you may wish to give someone the authority to remove that trustee and nominate a new neutral successor. An alternative is to give the option to nominate a neutral successor trustee when one is needed to a family member you trust, but who is unable to serve as trustee.
In 2007 the California Legislature created the Professional Fiduciaries Bureau and begining in 2009 required licensing for trustees, agents under a durable power of attorney for health care, or agents under a durable power of attorney for finances, “for more than three people or more than three families, or a combination of people and families that totals more than three, at the same time, who are not related to the professional fiduciary by blood, adoption, marriage or registered domestic partnership.” Executors under a will are not included in this list. There may be further changes to this legislation but until amendments are enacted, it is important to give someone the power to nominate a licensed fiduciary in case one or more of the trustees or agents you name are disqualified from serving due to this new law. This is particularly important where one of your intended successor trustees is outside your family and/or one or more of your beneficiaries is outside your family.
6. Ask the person you plan to nominate before you name him or her. Talk to the person you plan to name to see if he or she has any reservation about serving. Your nominee may have had a previous bad experience with an estate or trust, or know of someone who has. This is particularly true when it comes to health care agents. Some of your most trusted friends and relations will find themselves unable to put into effect the values you have expressed, or simply unable to deal with the emotional load of making decisions in the face of your dying. Take the time to talk to your property and health care agents to communicate your values. In particular, if you have religious values about your health care, dying and care of your body after death, be sure your agent for health care is clear about this.
7. Consider who else would have the knowledge and judgment to name a successor. Even if all your nominees are unable or unwilling to serve, there may be a person who is sufficiently familiar with your family/beneficiaries and your values to know who would be a good successor. You can name this person in your will or trust and the court will consider their opinion.
8. Multiple agents can be a problem; naming successor agents is good planning. If you are naming individuals to be your executor, trustee or attorney-in-fact, naming two persons to serve as co-executors, co-trustees or co-attorneys-in-fact will mean they have to act in union unless you carefully say otherwise. This can be at least inconvenient and may result in unnecessary delays to your estate/trust administration. Consider naming these persons with one serving alone and the other as the successor. An exception would be if you nominate a neutral (private professional or corporate trust department) to serve as co-trustee. Having multiple agents for making health care decisions can be a real problem if the agents disagree.