Eventually you will be unable to manage your own affairs. This inevitability may arise from you passing or becoming disabled. Selecting the right individuals to assume these responsibilities is critical to the implementation of your estate plan. Depending on your stage of life there are at least two and possibly three different roles that need to be addressed:
- Who will oversee the money (the “Financial Boss”)?
- Who will consult with doctors and be the lead person making medical decisions for you (the “Health Advocate”)?
- If there are minor children, who will take over the raising of your children (the “Guardian”)?
The Financial Boss
We refer to the person(s) named agent under your power of attorney and as successor trustee of your living trust the Financial Boss. It is typical to choose the same person for these roles although the responsibilities may vary slightly. An agent acting under a power of attorney assumes the right to act as you and can make legal contracts, sign tax returns, and take almost any action you could do individually. The rights granted under a power of attorney terminate upon your death. The successor trustee assumes responsibility for managing the trust and decides how your assets are invested and often plays a significant role in deciding when assets are distributed. It is common to have two or more people serving together in these roles. Depending on the specifics of your plan, for example if you have a lifetime trust for a special needs child, the successor trustee may serve for many years. The likely duration of the trust is an important consideration when choosing successors.
The first decision is whether you want an individual person or a trust company to serve as your Financial Boss. Most people name family members to serve in this role. If your plan passes assets to your family without significant restrictions, naming family members is usually the best choice. For example, if you are married to the parent of your children, it usually makes sense to have your spouse serve as a joint Financial Boss while you are alive, and sole Financial Boss when you pass. If you have concerns about whether your spouse is up to the role, you can name one or more of your children to share the role, or if children are not ready, one of your siblings.
As you consider your options, you need to ask whether this person will willingly accept the responsibility and devote the time required to fulfil the role. Being a Financial Boss is a thankless job. Each decision can be re-examined with the benefit of hindsight and making decisions to withhold requested distributions can be difficult when being pressured by family members. The Financial Boss will also likely need the help of investment advisors, attorneys, and tax professionals. If the trust is going to be around for a long time, does the person have a personal relationship with the beneficiaries and are you confident they can make the difficult decisions.
If there are complicated circumstances such as a second spouse, children from a prior marriage, financially incapable children, or you own a business, it is often wise to name a corporate trustee or a trusted professional familiar with your situation. While there is an added cost to this approach, these third parties are more equipped to make the difficult decisions that will inevitably arise.
Choosing Your Health Advocate
Your Health Advocate is the person you trust to communicate with medical professionals and, if you are not capable, to make medical decisions on your behalf. This person will be typically named in a document titled Designation of Patient Advocate or a Health Care Power of Attorney.
Typically, a spouse or child is chosen for this role. It is extremely beneficial if the person lives nearby. Especially as you age, the need for these decisions can arise suddenly. You want to be sure to inform your Health Advocate of your feelings regarding various levels of medical treatment. In addition, it is beneficial to execute a HIPPA consent form to make clear that the chosen person has the authority to know your entire health situation. While it is a best practice to name one person as your health care advocate, naming multiple family members under the HIPPA Release can enable health care professionals to share medical information with more than one family member. We often see different family members named Health Advocate and Financial Boss.
Choosing Your Guardian
For younger couples, the lack of agreement on who should serve as guardians of their minor children is usually the primary reason they do not have an estate plan. Choosing who will raise your children is often an extremely difficult decision. Once you decide, it is important to confirm that the person is willing to undertake this life-changing responsibility. Family dynamics change, and it is important to revisit this decision regularly. It often is advisable to divide the responsibilities of being the Financial Boss and Guardian. If you are asking someone to raise your children, your Financial Boss must understand what financial assistance you feel is appropriate to provide for the Guardians. For example, adding children to an existing household can be challenging and may require the need for a larger home.
