A Tale of Two Documents

As we discussed in previous posts, estate planning addresses more than just post-death planning. Powers of Attorney and Patient Advocate Designations allow a person to choose who has the authority to act on their behalf in the event of incapacity. It is important that all of your estate planning documents are up to date and specifically grant authority to the designee because companies seeking to protect themselves from litigation are reluctant to allow designees to act absent confirmation they are doing so in the Principal’s interest.

Nick and Paul have almost nothing in common except that both were in situations where their loved ones needed to make use of Durable Powers of Attorney in order to manage their affairs. While both families were able to act on behalf of their loved one, their experiences while making use of a Durable Power of Attorney were very different.

While Nick and Paul both had Durable Powers of Attorney, naming people to act on their behalf in the event that they became incapacitated, there were significant differences between these documents. Both men had originally done estate plans in the early 2000's, but only Paul had taken the time to regularly update his documents so that when both were incapacitated in 2015 Paul's Durable Power of Attorney was two years old while the Nick’s had not been updated in nearly 15 years.

Paul's son, who was designated as his father's Attorney-in-Fact had little trouble managing Paul's finances, including ensuring that Paul's home and bank accounts were properly funded to Paul's Living Trust. Paul's updated Durable Power of Attorney contained specific enumerated powers as well as the provisions that exculpated third parties who acted in reliance upon good faith that Paul's son had the authority to act on his father's behalf. Between these specific provisions regarding the powers the Attorney-in-Fact could exercise and the provisions for protection from liability, it was relatively easy to manage Paul's affairs during his incapacity.

Unlike Paul, Nick had not taken steps to ensure that his estate plan was up to date. Since the time Paul executed is Durable Power of Attorney, the person Paul named as his primary Attorney-in-Fact had died and Nick’s son needed to acquire additional documentation in order to prove his authority under his father’s Power of Attorney. In addition, Nick's Power of Attorney lacked significant detail with respect to the powers the Attorney-in-Fact could exercise. Instead of enumerating specific powers, Nick’s Power of Attorney only stated that his Attorney-in-Fact had broad authority to act in Nick's best interests, including a much smaller number of activities than Paul's more up-to-date documents contained.

Contrary to the relative ease with which Paul's son was able to manage his father's affairs, Nick’s son repeatedly needed assistance in establishing that the primary named attorney-in-fact could no longer act, that he had authority to act in his father's behalf with respect to particular activities, and that despite the amount of time which had elapsed since the execution of Nick’s power of attorney, no contradicting document existed. Fortunately we were able to provide sufficient assistance to keep these inconveniences from rising to the level of significantly interfering with Nick's care.

Keeping all estate plan documents up to date so that they reflect the client’s current wishes is important and not just because those wishes may change over time. Ensuring that documents provide sufficient guidance to designees and institutions allows the documents to be used efficiently and effectively when needed. While it is possible to guide designees through these matters, and we are happy to do so, it is much preferable, as with most estate planning, to know that the documents will work as intended and not encounter additional problems while attempting to cope and deal with obviously difficult circumstances.

Matt and Al

Planning for the Here

While much of the focus of an estate plan is on the hereafter, it is important to remember that a Living Trust, Durable Power of Attorney, and Patient Advocate Designation make up parts of the “here” planning as well. When a client begins to reach a point where they cannot manage all of their own affairs, those documents become the workhorses, helping loved ones assist in their care.

Ursula was a strong independent woman who had lived nearly thirty years after the death of her husband without ever considering remarriage. She had two grown children, Vivian and Walter, and three grandchildren, lived alone in the house she and her late husband had built nearly fifty years earlier, and was generally healthy. However, as happens to everyone, time eventually began to catch up with Ursula and it became more difficult to handle her own affairs.

First, she stopped driving at night, then limited her driving distance, but eventually Ursula admitted that it was no longer safe for her to drive at all. With this admission began the discussion of whether living alone was still a good choice but Ursula was not interested in selling her home, so Vivian and Walter did not press the issue. Vivian lived relatively nearby and did not work fulltime, so she was able to assist her mother when needed. The grandchildren also served as drivers when necessary.

As these changes began happening on a daily activity level, we became involved to update Ursula’s planning. We discussed the various parts of the estate plan and reminded Ursula of why she had the documents in the first place and, following those discussions, we helped her make some changes to her plan.

First, Ursula decided that it made sense to make Vivian an immediate Co-Trustee with herself to ensure that, if necessary, Vivian could manage any of the Living Trust’s assets in the event that Ursula was unable to act or simply did not want to deal with investment decisions and banking transactions. We also updated Ursula’s Power of Attorney to make it immediately active and named Vivian to act under that document for the same reasons. While Vivian (and Walter as the successor designee under both documents) had no desire to run their mother’s life, all the parties involve recognized that a time could come when it was easier on Ursula for someone else to act in her stead, and at her direction. Everyone involved recognized that Ursula was still in control and that any action taken by Vivian must be in Ursula’s best interest. This is not to say that Vivian could not take an action that benefited herself if Ursula so directed, but we did stress the importance of Vivian’s fiduciary duty to Ursula.

As time went on, circumstances did eventually arise where Vivian needed to act on her mother’s behalf, initially simply because Ursula did not want to be bothered, but later in order to manage affairs as Ursula developed additional health issues that limited her mobility. The documents prepared allowed Vivian to organize and simplify all of Ursula’s finances, consolidating her multiple bank accounts into a single account. As Ursula consented to moving to a senior living community, Vivian was able to sign documents for Ursula’s new apartment and handling the closing on the sale of Ursula’s home (she was delighted that one of her grandchildren purchased it). All of these transactions took place at arm’s length to ensure that there was no question that Vivian was acting in her mother’s best interest, and had the family dynamic been different additional documentation could have been provided to assure Walter that his sister was acting in their mother’s best interest.

In the end, due to the years of serving as Co-Trustee with her mother, when the time came for Vivian to administer the Living Trust after her mother’s death the process was simple, requiring little more than the writing of a few checks and the closing of a bank account. Nevertheless, this simplicity was borne from good planning; planning that gave Ursula piece of mind and made her later years less stressful. This is the result of good, ongoing communication with experienced professionals. Had nothing been done with Ursula’s planning as her life began to change, her later years would have been more difficult for Vivian and Walter. Always be aware that your estate plan is more than just a set of documents to be used after your death. Your estate plan is part of a process that needs regular updating to ensure that it still meets your current needs.

Matt and Al

Powers of Attorney 2.0

A few posts ago we addressed how the “here” portion of estate planning allows people to appoint others to make decisions on their behalf if they become incapacitated due to illness or accident. The Power of Attorney is the legal document allowing a person to designate who will make legal and financial decisions for them in the event of incapacity.  While many are aware of a Power of Attorney in the event of incapacity, it is also worth noting that not all Powers of Attorney serve the same purpose and if not properly drafted a Power of Attorney may prove useless in the case of emergency.

In its most basic form, a Power of Attorney is a declaration that someone (the Designee) can act on behalf of another person (the Principal). This power can be very specific, such as, “Bob appoints Frank on a particular dated, to sign Closing documents on the purchase of a specific house”. In this example, Bob cannot attend the Closing so he authorizes Frank to sign the documents in his place. Bob is not incapacitated but Frank is still allowed to act in his stead. This is a Limited Power of Attorney.

As with many legal documents, it is possible to achieve a wide range of results with a Power of Attorney. Expanding on the first example, if Bob were out of the country and needed Frank to handle additional aspects of his home purchase, Bob could sign a more expansive Power of Attorney that gives Frank the authority to act on Bob’s behalf with respect to “any action related to the purchase and furnishing of a residence.” This broader authority, likely backed up with more specific language authorizing particular actions, would allow Frank to retain a Realtor, sign Purchase Agreements, purchase furniture, and even deal with movers, all on Bob’s behalf.  The flexibility of a Power of Attorney makes it a powerful tool in planning.

In the previous two examples the Principal is not incapacitated, Bob just needs Frank to act in a situation where he is unavailable. In the context of estate planning, we expand upon this concept to create the General Power of Attorney. This document provides the Designee with broad authority to act on behalf of the Principal. The document, containing many specific authorizations to affirm to those following the Designee’s instructions that the Designee is authorized to act, allows the Designee to act on the Principal’s behalf with respect to many of the common and uncommon decisions that a person must make every day. This “General” power is not without limits, the most important of which is the Designee’s “Fiduciary Duty” to act only in the Principal’s best interest. It is also important to recognize that the law places limitations on the actions a Designee may take on the Principal’s behalf, though some of those limitations can be superseded by specific language in the document.

Drafting is important when it comes to Powers of Attorney because under Michigan law a Power of Attorney must specifically indicate when it functions. This means that in order for a Power of Attorney to be useful in protecting a person during incapacity the document must indicate that it is a “Durable” Power of Attorney. The term Durable simply indicates that even if the Principal is incapacitated (but still alive), the Power of Attorney is intended to continue to function.

One final note on the varieties of Powers of Attorney, from the examples above you can see that Power of Attorney can function even when a Principal is not incapacitated. A Power of Attorney that allows action upon execution is commonly termed an Immediate Power of Attorney. An Immediate Power of Attorney is useful in estate planning as certain actions become more cumbersome to a Principal. It will allow a Designee, such as a trusted child to act on a parent’s behalf even when the parent could handle a task on their own. More commonly used is a “Springing” Power of Attorney that automatically takes effect upon a particular condition, such as incapacity, affecting the Principal.

We hope that this explanation helps you appreciate the benefits and complexity of the Power of Attorney. From a Limited Power of Attorney that functions only for a number of hours to a General Durable Power of Attorney that springs into effect upon incapacity, the Power of Attorney is a complex but important part of an estate plan. With proper drafting, it can allow trusted Designees to easily manage the Principal’s affairs during an unexpected emergency, making sure that such times need not be more difficult than necessary. Due to the complexity and expansive power that a Power of Attorney can give to another person we recommend that you always consult with a trusted attorney, experienced in estate planning, before signing anything that gives someone else authority to act on your behalf.

Matt and Al

Making Choices 2.0

Since relaunching the blog, much of our focus has been on ability for an individual (the Principal) to choose other people (the Designees) to have the ability to make decisions in the event that the Principal becomes incapacitated. For almost every client this gives rise to the question, "who should I choose?" As with all of the decision-making aspects of estate planning, the answer to that question lies with the person who is creating the plan. As advisors and counselors, we can provide some insight into that decision, but ultimately it is one that must be made by the client.

Many of our clients struggle with choosing a single individual to name as a Designee, sometimes out of concern that the responsibility will create too heavy a burden for one person to handle. The good news in these circumstances is it is possible to appoint multiple Designees to work together to serve in any given role. This means that two or more people may be named to work together, either by unanimous consent, by majority rule, or each acting independently, in order to manage the responsibilities of serving under a Power of Attorney, Will, or Trust. While naming multiple Designees is always an option, it may not be the most efficient way of managing affairs, as naming multiple Designees normally requires those individuals to work together to achieve results. Further, with respect Designees named to make medical decisions under a Patient Advocate Designation, we generally recommend that our clients name a single person to serve as the Patient Advocate at any given time, in order to avoid creating a situation where multiple Designees cannot agree on a course of medical treatment, so doctors require that the Probate Court name a Guardian to remove uncertainty. The goal of implementing a Patient Advocate Designation seeks to avoid the Probate Court, not create a situation that requires it.

We make clients aware that they have the freedom to name anyone they desire to serve as a Designee, but all too often clients delay estate planning decisions due to concerns about their Designees. A common worry is someone who is not named will feel disappointment or even anger because of their omission. In those circumstances we find it helpful to remind our clients it is in their own best interest to choose the people that they believe have the capacity to fulfill the responsibilities of the role, especially as it pertains to them. If that means that a single child is named as the primary Designee in all of the documents because the child is more responsible, so be it, because that child has the ability to manage the responsibility. If the person named as the Designee in the Power of Attorney for making legal and financial decisions is different from the Designee in the Patient Advocate Designation for making medical decisions, that too is acceptable because the goal of naming Designees is to have the people best equipped make decisions making those decisions. Ultimately it is important to consider the consequences of naming someone less capable simply to avoid hurt feelings. Under those circumstances most people are able to trust their instincts, name the individuals who will do the best job and have enough peace of mind to set aside the worry that someone not named will be offended.

The bottom line in all of this is that the Designees named in an estate plan are essential to the success of that plan. While it is possible to name multiple individuals to work together, that is not always the most efficient way to administer a plan. The success of the plan is the result of naming the best people for the job. These decisions are not always easy and every planning situation is unique, which is one reason why it is especially useful to work with an attorney experienced in estate planning. That attorney should take the time to assist and guide you through the process of choosing Designees that meet the standard.

Matt and Al

Estate Planning Impact During Life 2.0

In our previous blog, we began unravelling the mystery that is Estate Planning by focusing on what happens when a person dies without a Will. Today’s blog focuses on how an Estate Plan can help avoid problems and complications during lifetime. While planning for an orderly transition at death is a major component of Estate Planning, a person is more likely to become disabled due to injury or illness rather than die, and planning can be critically important for these situations. Today’s blog discusses the “here” component of Estate Planning when someone becomes disabled but does not die.

When we discuss the “here” of Estate Planning we are talking about Powers of Attorney and Patient Advocate Designations that allow a person to designate who will have control of their lives in the event they are unable to control their lives. Each of these documents serves a different role, so it is important to understand what each does, when they work, and who should be named to handle the decision making responsibility. As you continue reading, keep in mind the person who signs and has these documents is known as the Principal and the person named to act on the Principal’s behalf is the Designee.

The Durable Power of Attorney is the document that gives the Designee the authority to make legal and/or financial decisions on behalf of the Principal. While Powers of Attorney can cover a wide variety of circumstances and specific powers, a Durable Power of Attorney for Estate Planning purposes gives much broader authority to make decisions on behalf of the Principal. The word “Durable” in relation to a Power of Attorney means the document is intended to be legally effective even if the Principal becomes incapacitated. Including a Durable Power of Attorney in your Estate Plan provides a tool to loved ones, allowing them a broad spectrum of powers, including, but not limited to, the ability to continue to pay bills, run a business, and even file lawsuits in the event that the Principal become incapacitated.

In the absence of a Durable Power of Attorney, a person wanting to make legal decisions on your behalf must file a Conservatorship Petition in the Probate Court. In addition to dealing with Estate Administration, the Probate Court is responsible for reviewing these petitions, appointing, and supervising those people named to make decisions on behalf of others in the absences of a Power of Attorney. The Probate Court process can be cumbersome and will include multiple hearings, documents, and meetings with attorneys. While it is important that this process exists to assist those who fail to plan, having a Durable Power of Attorney avoids these delays and additional stresses in what is likely already a very stressful time.

The Patient Advocate Designation is similar to a Power of Attorney (and is sometimes called a Medical Power of Attorney or Appointment of Healthcare Surrogate) but this document allows a Designee to make medical decisions on behalf of the Principal in the event the Principal does not have the capacity to make them. A well drafted Patient Advocate Designation grants the authority for the Designee to make a wide variety of decisions, including treatment options in emergency situations and long-term medical decisions such as recovery/rehabilitation alternatives. In the most extreme circumstances, a Patient Advocate Designation also allows the Designee to make decisions regarding end of life care, the so called “pull the plug” decision. These are important and serious powers to grant to another person, which is why we also include a Living Will as part of our Estate Plans. The Living Will (sometimes called an Advanced Medical Directive) articulates a Principal’s desires regarding their care, allowing them to communicate those wishes to their Patient Advocate, even when the Principal is unable to speak.

As the Conservatorship is the Probate Court equivalent of a Power of Attorney, a Guardianship is the Probate Court equivalent of a Patient Advocate Designation. This Probate Court process can determine who has the power to make medical decisions in the event another person cannot make their own decisions, but it is still a much more time consuming and stressful situation, requiring multiple meetings and hearings before decisions can be made. A Patient Advocate Designation ensures that the person you want making decisions about your care can make them promptly without waiting for the Probate Court to weigh in on the matter and select a person the Principal might not otherwise selected.

The Durable Power of Attorney and Patient Advocate Designation are important aspects of the Estate Plan. Choosing a Designee, and a successor Designee if necessary, is an important decision and we strongly recommend that the people chosen to be named in these documents be the people who our clients feel are the most likely to make the decisions that the client would want made. While it is true that many clients worry if children (or parents) will be hurt or offended if they are omitted, but we feel it is better to name those people you feel are able to handle the responsibilities than to include someone who cannot or will not make the decisions that are best for you.

As with much of what we write about, there is a great deal more to this topic. While we strive to provide you with good information, it is important to remember to consult with an attorney experienced in Estate Planning before taking any action in order to avoid potentially expensive mistakes.

Matt and Al

Why You Need an Estate Plan 2.0

Congress is currently engaged in the task of revising tax law, including provisions relating to estate tax. The current proposal calls for raising the estate tax exclusion amount (the threshold over which a person incurs estate tax liability) from the current $5 million per person plus annual cost of living increases to $10 million per person plus annual cost of living increase. Additionally the estate tax would eliminated entirely in 2024. While we am personally skeptical that this is a “middle-class” tax cut, whether the current exclusion is retained, doubled, or entirely eliminated, it will have no effect on the estate planning for 99.98% of taxpayers or our clients. 

Over the last 40 years there has been an overemphasis on trying to avoid estate taxes when talking about estate planning. This has fueled the misconception that estate planning is only for the wealthy who want to control their fortunes from beyond the grave and minimize the amount of taxes their estate might have to pay. The reality is, as the estate tax exclusion has increased over time and eliminated the concern of estate taxes for most people, protecting one’s family and avoiding the state probate process has become much more important. Estate planning creates your blueprint for taking care of your loved ones in those hardest of times after your passing, and taking care of yourself and the ones you love if you are incapacitated because of illness or accident.. 

There are four common documents that make up an estate plan, two of those documents address concerns about the "here" while the other two address what happens in the "hereafter." The "here" refers to a situation where a person becomes incapacitated and unable to make their own decisions while the "hereafter" documents address the administration of assets following a person's death. We will address each briefly in this blog and discuss each and more detailed in future blogs.

The "here" documents include the Durable Power of Attorney and the Patient Advocate Designation, which allow you to appoint others to make decisions for you in the event of sickness or incapacity. This ability is important because it allows a trusted family member or friend to make immediate financial, legal, and medical decisions if you become incapacitated, rather than having to go through a long and costly court process. 

The Durable Power of Attorney names a person who, usually upon your incapacity, has the authority to deal with your financial well-being, including arranging for payment of bills, filing insurance claims and lawsuits, and handling other business matters on your behalf. 

The Patient Advocate Designation appoints a person to make medical decisions on your behalf, up to and including “pull the plug decisions”. Anyone over the age of 18 should have these documents because absent the existence of these documents it becomes necessary to Petition the Probate Court for the authority to make financial, legal, or medical decisions on behalf of another person, this process can be time consuming and cumbersome especially when a loved one needs assistance immediately.

The “hereafter” documents, Wills and Trusts, are documents that serve to enforce your asset distribution wishes after your death. These documents create an organized distribution scheme for your assets that you can modify as your situation and assets change, and if funded properly, can avoid the cost and time delays of probate under state law. The similarities and differences between a Will and a Trust, as well as how they work together, will be discussed in greater detail in future blogs.

At this point, if your answer to any of the following questions is “yes”, you should consider estate planning: 

1. Do you have minor children? A Will and/or a Trust will allow you to name Guardians you are comfortable with to raise you children and ensure that any assets you can pass along to your children are used to their greatest advantage.
2. Do you have assets?  Whether the value of your assets is large or small, a properly drafted estate plan allows you to determine who will receive your assets and under what terms or conditions, rather than having your assets distributed pursuant to a state statute.
3. Do you want to determine who will be able to make legal and medical decisions on your behalf in the event you are incapacitated? Knowing who will make decisions on your behalf is very important because it allows you to guide those people with respect to the decisions you would want them to make. It also eliminates the stressful need to involve the Court when decisions need to be made promptly.

It should be clear that regardless of the size of one’s estate, proper planning is necessary for a number of reasons besides estate tax concerns. An attorney experienced in estate planning can answer your questions and help guide you in preparing a plan that fits your needs, being available to work with you to change your plan as your needs change, and being there to assist and guide your loved ones through those difficult times after your death.

Matt and Alan

Estate Planning and Dementia

We hope that everyone enjoyed the long holiday weekend and is ready to return to work refreshed and prepared for a successful week. Today's blog addresses the difficult subject of preparing for a time when we are unable to make our own decisions due to the onset of disease. We know how difficult these times are for families and encourage our clients to consider these possibilities in their planning in order to limit the problems that will arise if they are unable to make decisions for themselves.

I read an article recently about Dementia Awareness Week in the United Kingdom which got me thinking about how people can prepare for the impact of dementia long before any signs of the condition are apparent. A diagnosis of dementia can be devastating to a person and their loved ones. The symptoms of dementia are progressive and its time frame is unknown, but can include memory loss, communication problems, and mood changes.

While dementia can be a horrible diagnosis, with proactive estate planning you can ensure that someone with dementia is protected and properly cared for making that challenging time a little easier. As a person becomes less able to handle their affairs, it becomes more important to put documents in place that will allow designated people to make legal and medical decisions on behalf of that person as they become medically incapable of handling their own affairs.

A Durable Power of Attorney is a good place to start. This document allows a person to name another person or persons to make legal decisions for them immediately or upon a determination of. This ensures that whether because a person no longer wants the burden of making decisions or because they are unable to make decisions for themselves, that those decisions will be made by a person of their choosing.

A Patient Advocate Designation is similar to a Durable Power of Attorney, in that it is used to name another person to make decisions when a person is unable to make them for themselves, but names people to make medical instead of legal decisions. This is especially important in cases of dementia because ensuring that your desires surrounding healthcare are followed even when you cannot articulate them for yourself is important.

Without these two documents, loved ones will not be able to readily make decisions for a person who becomes incapacitated, requiring the family members to turn to the Probate Court to have a Conservator and Guardian appointed to make medical and legal decisions. The process is costly, can take valuable time, and is a public process. By executing a Durable Power of Attorney and a Patient Advocate Designation, a person can avoid the probate process and provide for immediate decision-making and protection of the person with dementia.

Establishing a Living Trust (a revocable trust) can also protect a person with advancing dementia. If ownership of assets have been transferred to the Trust, the person named as successor trustee can use those assets to care for a person with dementia without any cost, delay or public scrutiny by the probate court. 

Additionally. while they are able, a person diagnosed with dementia may also want to consider an Ethical Will, which is a way to share one's values, life lessons, and hopes with family and friends. The Ethical Will does not transfer material wealth, but can be a statement of what truly matters in life and a hope that those who receive eventual inheritances will take to heart the values and hopes laid out in the document.

While all of these documents are especially pertinent for a person diagnosed with dementia, we should all consider implementing them in order to protect ourselves against an untimely incapacity.

Alan and Matt

How do Powers of Attorney and Patient Advocate Designations Fit into an Estate Plan?

While people generally understand that a Power of Attorney and Patient Advocate Designations protect them if they become incapacitated, many people are confused about how these documents work and what their designees are obligated to do.

     Often, after signing their estate plan documents, our clients will ask, "now that I have a Durable Power Of Attorney and Patient Advocate Designation, what does my designated person have to do?” The simplest answer is they do not need do anything, nor can they do anything unless and until the client is declared incapacitated under the definition normally set forth in the document. The definition we use in our documents requires that two doctors certify in writing that the client is unable to care for his or her "financial or physical well-being". Once the designated person obtains those certifications, only then are they authorized to act on behalf of the incapacitated client. Upon obtaining the authority to act, the designees gain the authority and responsibility to make decisions that are in the client’s best interest.

     Under the Durable Power of Attorney, the designee should determine the assets of the incapacitated person and take action to protect those assets. This may include such actions as meeting with an investment advisor to ensure the assets are properly invested, paying bills, maintaining the house or other real estate, and making sure the incapacitated person receives care. While performing these tasks, the designated person should also keep complete financial records to show what actions they took and how they spent funds. In the course of the designee’s actions, any party shown the Durable Power of Attorney can rely on the fact that the designated person has authority to act with respect to all of the legal decisions the incapacitated person might otherwise have been able to make. 

     The person designated under the Patient Advocate Designation has the authority to make any necessary medical decisions, including treatment, selection of doctors and facilities, rehabilitation, and decisions regarding end-of-life care. We recommend that clients discuss what care he or she wants or does not want with their designees so that those people are better able to make decisions should the time come. Often, a Living Will is executed in conjunction with the Patient Advocate Designation as a declaration of those desires, especially of the intent not to be kept alive by heroic measures if it would merely artificially prolong the dying process.

     The responsibility given to another person under a Power of Attorney or Patient Advocate Designation is significant and should not be taken lightly. However the designee does not need to handle matters alone, they are allowed to employ professional advisors to assist them in caring for the client’s interests. As we always tell our clients, if it ever comes time for your designees to act, we will be there for them just like we are here for you.

How Helping Mom with the Bills can Derail an Entire Estate Plan

When clients make decisions regarding access to their financial accounts, they often do so for their own ease or convenience. It is important to review the ownership of bank and investment accounts to ensure that a decision made in the name of simplicity does not result in unintended consequences.

     Often older clients have their children assist  them with regular financial activities, like shopping, paying bills, or banking and investment activities. For simplicity, the client adds that child as a co-owner of the client’s bank and/or investment accounts. While in some cases this is not a major issue, co-owning an account with a child can unintentionally skew the client’s distribution to family members under their intended estate plan. 

     When a person dies, assets that they own individually must pass through probate to name the beneficiaries, and assets owned by a client's Living Trust pass pursuant to the terms of the Trust. However, when a client co-owns an account with a child and the child survives the parent, the child becomes the sole owner of the account. Assets that the client intended to pass to a number of different beneficiaries are the property of a single person and not subject to the terms of the Probate Court, Will, or Trust. If a client with three children intends to divide assets equally between those children, but co-owns a checking account and an investment account with one of those children then the other two children stand to inherit substantially less than their parent intended (or possibly be disinherited entirely). 

     Co-ownership during the client’s lifetime may also become a  problem because even though  the client and their child know the child is only an owner to help their parent, creditors do not want to see that distinction. An expensive legal battle may occur to protect the assets from creditors of the children. Additionally, when the client names a child as the co-owner, that child has total access to the bank or investment account. We hope that the child can be trusted, but we have seen a number of situations where the child has used the parent's funds for their own purposes, whether because they have alcohol or drug dependencies or simply are unable to control their own spending impulses. In these situations, not only do the eventual beneficiaries suffer, but also the parent can suffer financial ruin when they otherwise would have been financially comfortable.

     Thankfully, it is easy to avoid at least some of these problems. If the child is trustworthy, the  easiest way is to make the child a signatory on an account without making them a co-owner. The downside to this option is that many institutions do not allow this option. Instead, the parent can execute an immediate power of attorney, allowing the child to act on their behalf with respect to financial decisions. If the client has a Trust, the client can name the child an immediate co-Trustee of the parent’s Living Trust, giving powers to assist the client. These options allow the child legally to  act on their parent’s behalf without unintentionally changing the distribution plan at death or worrying about a child's creditors.

     We realize that for many of our clients the distinction between a child signing a check as the co-owner of an account rather than acting under the terms of a Power of Attorney is unclear and seems overly complicated, which is why education is such an important part of our job as attorneys and counselors. We must make sure that both our clients and their children understand that the risks of co-ownership outweigh any convenience they believe exists and that the alternatives, acting under a Power of Attorney or having a Trust with the child as an immediate co-Trustee are safer and no more difficult. 

     It is attention to details such as these that demonstrate to our clients that estate planning is more than simply drafting documents.  We must be aware of the clients’ assets and counsel them as to the appropriate ownership of the assets, given their situation. While coownership of an asset with the child may be appropriate in certain situations, clients should not enter into it until they understand the consequences of that action.

Estate Planning for College

As we guide our clients through the planning process we watch for other opportunities where we can assist them and give them more peace of mind. One opportunity that frequently arises involves reassuring parents with college aged children that if something happens to their child while away at school they will still have the ability to assist their child.

     Often a strong motivation for people to have an estate plan is concern for what will happen to their children in the event of their death. These clients focus on providing structured distributions over the children’s lifetimes to ensure that there are sufficient assets to help their children along the way. They also pay special attention to whom they name as Guardians for their children, often naming three or more potential Guardians so they are assured that their children are raised in a loving home. But for as much time as these clients spend planning for their minor children, as those children grow older their parents forget one very important piece of the plan.

     Parents take for granted that they will be able to care for and assist their children throughout their lives. However, frequently parents forget that once a child reaches the age of eighteen, that child is an adult in the eyes of the law, entitled to make their own decisions, and protected by all the laws and rules that exist to keep information private and ensure proper care. Thankfully the parents already know, though frequently forget, about a tool that can allow them to continue to care for their now young adult child if that child is injured or falls ill. 

     As part of their own planning, parents executed Durable Powers of Attorney and Patient Advocate Designations, naming those individuals they wanted to make their decisions if they were unable to make decisions for themselves. By encouraging children to execute the same documents, after those children turn eighteen, parents will have the authority to make legal and medical decisions for their children. This way, no parent would race across the state or country after learning that their child needed assistance only to discover that doctors, bank, landlords, and more refuse to take instructions from the parent.

     In addition to providing a layer of added protection for children, beginning the estate planning process shortly after turning eighteen also has two other benefits. First, those children have now been introduced to the attorney who did their parent’s planning and have some idea of what is involved in estate planning. No longer are the Will and Trust mysterious documents known only from pop culture references. It also demystifies attorneys in general so that in the event that the now young adult encounters a situation where they need legal counsel they have a person they know they can call. 

     The second benefit arises because by starting to plan early in their adult lives these children begin to build a habit of planning. As they get older and begin to accumulate wealth of their own we work with them to put together their own Will and possibly a Trust. We can recommend that they begin working with a financial planner early in their life so they establish good habits and avoid falling prey to pitfalls that hamstring people without these resources.

     The process of putting together Powers of Attorney and Patient Advocate Designations is not onerous or time consuming. Most of the time we can handle the entire matter in a single meeting lasting only about an hour. At the end of that time, your child has been introduced to a number of valuable adult experiences and you have the peace of mind that you will be able to continue to look out for them while they grow into the strong, independent, successful adults you know they can be. 

Planning for Same-Sex Couples in Michigan

While the Federal and state rules regarding same-sex marriage are changing rapidly because of the recent Supreme Court opinion and legislation in some states, Michigan currently does not recognize same-sex marriage. This failure to recognize same-sex marriage makes estate planning even more important for same-sex couples in Michigan because many protections that exist automatically for opposite-sex couples do not protect same-sex couples.

A few years ago, we met with a same-sex couple who asked how they could insure that their partner not only had the right to make legal and medical decisions in the event incapacity, but how they could guarantee their partner would be entitled to assets. While both partners worked, one contributed more monetarily and had a greater amount of assets, including their home. Knowing their desire to protect each other, we designed their estate planning documents to meet their needs.

One of the clients was particularly concerned that in the event of her incapacity some of her family, who disapproved of her relationship, would attempt to exclude her partner from being present and making decisions on her behalf. Knowing that in the absence of other instructions, the Probate Court prefers to name a family member as Guardian or Conservator, we prepared Durable Powers of Attorney, Patient Advocate Designations, and Living Wills, clearly specifying that each of the women wanted the other present and in control of making decisions in the event of their incapacity.

After addressing the clients’ concerns regarding care in the event of emergencies, we turned to what happens after one of them passes away. Under Michigan law, if a person dies without a Will or a Trust, the state intestacy statute determines how assets are distributed. That statute ignores same-sex partners in making distributions and can leave one partner homeless and perhaps even penniless. The first step we took to avoid this situation was to transfer their residence to the two of them as "joint tenants with right of survivorship." While this form of ownership does not provide the same creditor protection to same-sex couples as it does to married opposite-sex couples, it does still guarantee that the survivor of them would own the residence. Additionally, we set up a Living Trust for each of them and provided that upon the death of one, the other partner received all of the tangible personal property, household items, and jewelry to insure that neither would end up owning a home but have to give up other tangible reminders of their loved one.

The Living Trusts also provided that each of their assets would be held in trust for the survivor of them. While in some situations, for tax or personal reasons, it would make more sense to leave assets to a same-sex partner outright, it was important to our clients that in the event any assets remained after the death of the second of them those assets would go to each of their family members who supported them and their choices. However, each named their partner as the successor Trustee so that during her lifetime she would retain almost total control over the assets and never need to request assets from someone else.

Over the years, we have amended these client’s documents to comply with changes in the laws that affect their relationship. But while times and laws are changing, and more states, as well as the Federal government, are treating same and opposite-sex couples equally, until Michigan law does the same it is important for us as professionals to provide guidance to our clients so that they are aware of the ability to control their situation. It is also important to remember that each situation is unique and calls for an analysis of what the partners want, and not presuming that every same-sex couple’s needs will be met with the same plan. 

Making Changes to Powers of Attorney

     We previously discussed how a Power of Attorney allows another person to make legal decisions on your behalf, whether immediately or only upon your incapacity. However, what happens if, after executing a Power of Attorney, you change your mind about whom you want to act on your behalf? If this happens, you need to take certain steps to make certain you revoke that person's power.

     The first step is to execute a new Power of Attorney, changing the individual designated to act, known as the Attorney-in-Fact. The new Power of Attorney should specifically state that it supersedes all previous Powers of Attorney.

     Next you should notify the person previously named in writing and request the return of any copies of the original Power of Attorney. This notice informs the person that they no longer have the duty or the power to act on your behalf. When you receive copies of the superseded Power of Attorney make sure to securely destroy those copies along with any other copies in your possession.

     It is also important to inform third parties that this person no longer has the authority to act on your behalf. This notice should be done as soon as possible orally, and then follow-up in writing. The third party, such as a bank, is then fully aware of the change and acts at its peril if it allows the original Attorney-in-Fact to act. By providing a copy of the new Power of Attorney, you specifically show that you revoked the prior document and executed a new document in its place. This allows the third party to know not only that it should no longer honor the previous document but also whom you have chosen to replace the previous Attorney-in-Fact.

     Used properly, a Power of Attorney can make difficult situations much easier by allowing someone to make important decisions while you are incapacitated or merely unavailable. However, because a Power of Attorney provides another person with the authority to act on your behalf it is important to review that document periodically to ensure that the people named are still the best people to make those decisions. Finally, it is important to consult with an attorney before signing any form of Power of Attorney. Do-it-yourself books and websites offer broad, general documents that are often insufficient to meet a person’s needs. By speaking with an experienced attorney, you are assured of receiving documents and the support needed to address your specific situation.

Matt Ferrara

Planning for College-bound Children

     With the beginning of a new school year, today is a perfect opportunity to address the subject of Powers of Attorney and Patient Advocate Designations for a client’s adult children. As we previously discussed, despite their parent’s perception, once a child reaches the age of eighteen they are an adult in the eyes of the law, and therefore their parents no longer have the right to make decisions on their behalf should they become incapacitated.

     This can be corrected by having children execute Durable Powers of Attorney and Patient Advocate Designations, naming their parents to make decisions, and parents can continue to care for their children should they become incapacitated. These documents provide both parent and child with peace of mind that, in the event of an emergency that causes the child to be incapacitated, the parent will have the ability to assist their child without needing to petition the probate court for that authority.

     It is important the clients’ children understand how the documents they sign will protect them should their parent need to use them. The Patient Advocate Designation allows their parent to make medical decisions in the event that the child is unable to make those decisions because of illness or injury. A Durable Power Of Attorney is more complex, because it allows the parent to make legal and financial decisions, including paying bills, dealing with landlords, and filing lawsuits on the child's behalf if the child is incapacitated and unable to take these actions for themself. Both the parent and child should know that without these documents, if the child becomes incapacitated, the Probate Court must be petitioned to name a party to make decisions, which can be expensive and time-consuming.

     The process of drafting and executing these documents also has the added benefit of providing the opportunity to introduce clients’ children to the client’s legal and financial advisors. While discussing the importance of these documents with their children the client also has the opportunity to begin to explain their own planning.  This early introduction to both the estate and financial planning can set the children on a path to a more secure future as well as act as a stepping-stone to understanding their parents’ planning. While some clients balk at the idea of introducing their children to the planning process at such a young age, taking the time to execute a patient advocate designation and durable power of attorney can save the client and their child from significant inconvenience, time delays and cost in the event of an emergency.

Matt Ferrara

Keeping Powers of Attorney Fresh

     In the past year, we have heard from a number of clients letting us know that banks and other financial institutions are reluctant to accept Durable Powers of Attorney dated more than two years ago. The same is also true of doctors and hospitals when it comes to accepting Patient Advocate Designations. All of these institutions share this reluctance because when a significant amount of time passes between the execution and use of the document , there is a concern that the person may have executed a new document in the intervening time, naming a different person to act on their behalf. For this reason, we encourage our clients to regularly “refresh” their Patient Advocate Designations and Durable Powers of Attorney.

     Another benefit of regularly refreshing these documents is the ability to review the choices clients have made in naming people to make decisions on their behalf.  It is a good idea make sure those people named are still living, able to assist the client, and still whom the client wants to make decisions on their behalf. This review is important because Patient Advocate Designations and Powers of Attorney are documents clients generally do not think about after signing, until something goes wrong and the client needs to make use of the documents. This "sign and put in a drawer" philosophy frequently leads to complacency, and clients are surprised to discover, years later, that their documents contain people whom they have not spoken to in years or who would no longer be suitable to assist the client should they be incapacitated.

     A final benefit of regularly refreshing Powers of Attorney and Patient Advocate Designations is the ability to have documents that comply with the most recent statutory language and best practices for creating such documents. Over the last ten years the specific powers enumerated in a comprehensive Durable Power Of Attorney have increased substantially, ensuring that the person named to act has the authority to deal with a wide variety of situations and institutions that all require specific permission prior to releasing any information to a third party.

     The process of refreshing these documents does not need to be expensive nor time-consuming. An experienced attorney, especially one the client has worked with previously, should be able to review the documents with the client over the phone and have updated documents prepared to sign in a matter of days. It is important to work with an experienced professional rather than using a fill in the blank form or other do-it-yourself method because these documents confer substantial power to another person to act on your behalf. 

Matt Ferrara

Recent Changes in Michigan's Power of Attorney Law

As our clients get older and making decisions becomes more of a challenge for any number of reasons, it becomes even more important to have a properly drafted Power of Attorney authorizing others to make financial decisions on their behalf. Last year, the Michigan Legislature adopted a new Durable Power of Attorney (POA) statute, MCL 700.5501, effective after October 1, 2012, which while not invalidating documents executed prior to that date, applies to documents created after that date.

The requirements of the new statute include:

1. The POA must be signed in the presence of two witnesses, neither of whom is the attorney-in-fact, both of who must sign the POA, or the POA must be acknowledged before a notary public.
2. The attorney-in-fact must now sign an acknowledgment or acceptance, with statutorily prescribed language, before the attorney can act. This acknowledgment includes an understanding that there are specific limitations to the attorney-in-fact's powers, that the attorney-in-fact must maintain proper records with respect to receipts, disbursements and investments, and that the attorney-in-fact may be liable for any damage or loss to the principal.
3. The attorney-in-fact cannot make a gift of any of the principal's assets, unless specifically provided for in the POA.
4. Unless the POA specifically provides that, the attorney-in-fact cannot create an account or transfer an asset in joint tenancy between the principal and the attorney-in-fact.
5. The POA may exonerate the attorney-in-fact of any liability to the principal for breach of fiduciary duty, however the statute specifically exempts actions committed by the attorney-in-fact in bad faith or with reckless indifference.
6. The new statute specifies that it does not apply to a POA executed before October 1, 2012 or executed in a business setting.

     The Michigan Trust Code (MCL 700.7602 (5)) also contains language that with respect to a Trust the "settlor's powers with respect to revocation, amendment, or distribution of trust property may be exercised by an agent under a durable power of attorney only to the extent expressly authorized by the terms of the trust or the power of attorney".

     With the changes in the law, more thought and effort will be needed to determine what a client wants or needs with respect to the provisions drafted in the client's POA. These changes will become especially important if the POA is intended to be eventually used for Medicaid or other sophisticated planning. As always, a thorough review by experienced advisors is highly recommended..

Alan Ferrara

Potential Problems with Joint Ownership

     Occasionally we speak with someone who believes they have taken care of the bulk of their potential estate planning issues by including their children as co-owners on their bank accounts or other investment assets. Since assets only pass through the probate process if owned solely by the deceased, these clients have indeed taken steps to minimize their estate's exposure to the Probate process. However, these clients have not considered the potential downside of co-owner arrangements.

     Adding children as co-owners of real property or bank accounts avoids the need for those assets to pass through Probate, but it also gives those children the opportunity to make use of those assets in whatever way they see fit. While parents may make their children co-owners of accounts with the best of intentions, unexpected events arise that can result in the child making use of funds that their parent relies on for day-to-day expenses. Even without the child accessing the funds for their own needs, the account may be subject to the claims of the child’s creditors, thus creating the potential for even greater loss to the parent. Even if there are no problems during the parent's lifetime, co-ownership situations can create problems following the death.

     Presume a parent intends to split their estate between three children, but names only a single child as the co-owner of the bank account that holds the bulk of their estate. Following the parent’s death, that single child is the sole owner of the bank account and has no legal obligation to share the assets contained in the account with siblings. Even presuming that the child desires to follow their parent’s wishes to share the assets in the bank account, distribution of those assets now has tax implications for the child, as opposed to the parent's estate. Some clients understand these negatives, but believe that naming their children as co-owners of an account is unavoidable for other reasons.

     As parents age, circumstances often require a child to assist their parents in the budgeting and bill paying process. If this assistance reaches a point where the child is handling most of the check writing, parents commonly add the child as a co-owner on the account for everyone's convenience. This change, while seemingly innocuous and beneficial to the parent, creates the potential for  the problems discussed above. Thankfully, simple estate planning techniques can easily avoid all of these problems and allow children to assist their parents with the minimum of effort.

     By executing an Immediate Durable Power Of Attorney, a parent can give their child the ability to manage the parent’s finances without becoming co-owners of an account. This allows the child to assist their parent with bill paying while protecting the account from the child's creditors. The same result is achievable by changing the ownership of the bank accounts to the name of the Living Trust and naming the child as a current co-trustee. The additional benefit of using a Living Trust is that assets held in the name of the Living Trust do not pass through Probate after the owner’s death.

     Any time an individual gives another person the authority to act on their behalf, there is the potential for abuse of that authority. This is one of many reasons it is important to consult an experienced estate planning attorney before executing documents that grant someone else the authority to act on your behalf. If you have specific questions regarding the use of Powers of Attorney or Living Trusts for you or one of your clients please feel free to contact us directly and we will be happy to answer your questions. 

Matt Ferrara

Planning for Terminally Ill Clients

     While we hope the estate planning we engage in will be as good thirty years from now as it is today, and that we will not need to use it until then, it is a sad fact of life that an unexpected serious illness requires us to reconsider our planning.

    Most of my clients have a Durable Power of Attorney that is only effective upon their incapacity. This means that the person designated to make decisions has no power until two doctors certify that the client is incapacitated and cannot care for their own physical or financial well-being. It may be a good idea for seriously ill clients and those with a terminal illness to provide for an Immediate Durable Power of Attorney. This allows the person designated to make legal decisions even if the client is not incapacitated, but simply unable to physically deal with financial issues. It gives the person designated flexibility in working with banks, brokers and others on behalf of the seriously ill client.

     An additional concern we have started to encounter is that some banks and brokers are unwilling to accept Durable Powers of Attorney executed longer than six months ago. These entities consider these documents "stale,” and are concerned they may not reflect the current viewpoint of the client. While the Michigan statute has no time limit on a Power of Attorney properly executed, it is usually cheaper to revise the Durable Power of Attorney rather than argue with the entity. For that reason, it may be advisable for a seriously ill or terminal client to "refresh" the Durable Power of Attorney so it is acceptable to banks and brokers.

     Just as Powers of Attorney frequently only function following a client’s incapacity, most clients are the sole Trustee of their Living Trust, and a successor Trustee does not have any authority until the client becomes incapacitated or dies. Again, it may be a good idea for a seriously ill or terminal client to modify their Living Trust to provide for a Co-Trustee immediately rather than only on the death of the client. Again, this Co-Trustee will help the client deal with matters relating to assets owned by the Trust.

     Finally, when reviewing documents in these circumstances, it is also a good idea to review the Patient Advocate Designation and evaluate those people named to make medical decisions in the event the client is unable to make their own decisions. Since those people may be called upon to make decisions sooner than later, it is important that the client remain confident in their ability to follow the client’s wishes. 

   On Thursday we will discuss reviewing dispositive provisions of the estate plan in consideration of the fact that a person's life may be cut short.

Alan Ferrara

Talking About an Estate Plan

As we discussed previously, the estate planning process does not end with the signing of the documents. One aspect of the process that is the client’s responsibility involves discussing planning with those individuals named to make decisions and potentially with beneficiaries.

In our practice, we have found that the best plans are ones where everyone involved knows the plan and there are no surprises. This does not mean that the client need to discuss every detail of their estate with every person named in the documents. However, providing those whom the plan most affects with sufficient information makes execution of the plan significantly easier.

First, it is important to inform those people who have been designated to make decisions upon the client’s incapacity. We encourage our clients to discuss this prior to the signing, therefore avoiding a situation where a named individual intends to immediately step aside. Talking with your named designates ensures that all of the individuals named in an estate plan are willing to act if called upon, and decreases the chance that the probate court will become involved in naming a successor designee. Additionally, it is important to inform those designees where those executed documents are kept so they can be located easily in the event the need to step in arises.

In addition to informing those individuals named as designees of their potential roles and duties, it is also important to discuss with these people the client's concerns and desired treatment if called upon to act. It is important to provide designees with sufficient information regarding values, beliefs, and wishes so that they are able to make decisions that they feel are in the client's best interest and reflect decisions that the client would make were they not incapacitated. Frequently these discussions will touch upon sensitive topics such as the circumstances under which the decision to withhold medical treatment is appropriate. Many clients express a reluctance to have such discussions due to their sensitive nature. If a discussion does not occur, at a minimum we recommend providing a letter with instructions regarding those issues. The letter can be kept with the Patient Advocate Designation.

The importance of establishing guidelines for designees is not limited to those named as Patient Advocate. Should a client become incapacitated, those who will act on their behalf as Successor Trustees under the Trust and Attorneys in Fact under the Durable Power of Attorney must also be aware of the client's overall goals. Both of these roles may involve providing access to assets for dependents, continuing the client's charitable gifting, and the operation of the client’s business. If those individuals named are not familiar with the client’s desires, it makes acting on behalf of the client significantly more burdensome. Again, the client can provide many of these details in a separate writing that is kept with the relevant documents. Important information to be contained in this writing includes specific instructions as to what should be done with particular assets should the client become incapacitated, instructions for the continuance or modification of charitable giving, and instructions regarding the operation of businesses to name a few.

In addition to designees named in documents, others may benefit from receiving advanced information about the terms of an estate plan. Providing beneficiaries with information regarding potential inheritances establishes reasonable expectations and reduces the chances that a beneficiary will challenge the terms of the estate plan. How much information a client chooses to give to a beneficiary depends on the family situation. There is no correct answer to this question, as the right amount of information can vary significantly from client to client and even from beneficiary to beneficiary. Where some beneficiaries have sufficient experience and maturity to provide them with the full details of their potential inheritance, others may misuse such information and engage in patterns of reckless or irresponsible behavior.

It is been our experience however, that beneficiaries who are informed of distributions for their benefit in at least general terms create the least amount of problems following a death. When beneficiaries have an understanding of the donor's reasoning in making the gifts they make, there is often less conflict following the death. This is not to say that a discussion of potential distributions solves all problems. There are individuals who, upon learning of their share of an estate, will always feel they have been treated unfairly.

In addition to discussing the specific distributions laid out in the in the estate plan it is also frequently beneficial for a client to discuss the distribution of their personal property. By learning which items of property their loved ones feel will provide a connection to the client after death, the client is better able to ensure that their loved ones are able to retain those items and the memories associated with them. When a client discovers that multiple loved ones have an interest in the same items, it is possible to head off conflicts by designating particular individuals to receive particular items so that disputes do not occur following a death, avoiding further pain during an already difficult time.

Discussing estate planning, medical concerns, and death are difficult subjects. However like much of the rest of the estate planning process, by engaging in these discussions while people are healthy and active, it is possible to avoid a great deal of trouble should a person become incapacitated or after they have passed away. In our practice, we strive to provide clients with peace of mind that their loved ones will be cared for following their death. By encouraging our clients to engage in discussions regarding their planning we hope to avoid potential pitfalls and awkward situations as well as additional grief, strife, or problems after a client's death.

Selecting People to Administer your Estate Plan

An important part of developing an estate plan is selecting people to help administer the plan at your death or incapacity. This includes Personal Representatives to administer the Will under Michigan probate, Guardians to see to the physical well-being of your minor children, and Successor Trustees to administer the assets of the Living Trust for the benefit of your beneficiaries. Sometimes selecting people to serve in these capacities is not an easy task because there may not be family members or friends you trust enough to select for those positions. Alternately, there may also be a concern that you will offend some people by not naming them to certain positions. This should not deter you from making decisions that you think are the best ones, because, after all, you will not be around to listen to their complaints.

Guardians are obviously important because you want to select people whose child-rearing philosophies are similar to your own. That may actually be a sibling and his or her spouse, but it may actually be another relative or a close friend. Another common concern when selecting guardians is geographic location. While a family member who lives in another state may be more than capable of caring for your children is important to consider whether such a drastic move is good for your children. The thing to focus on is "what is the best for my children?"

Nearly as important as the Guardian, the Successor Trustee administers trusts, pursuant to their terms, when the initial trustee (who is usually the trust maker) becomes incapacitated or dies. Naming a successor trustee is not a decision made lightly. It is possible to name a family member, a friend or colleague, a corporate trustee, or a combination of them as trustee or co-trustees. Each of these alternatives has positive and negative aspects.

Family Member

Pro: They have family experience with the beneficiaries, are empathetic, and are personally involved.

Con: They are probably unskilled in business, there is no record of accomplishment in maintaining or growing assets, or they can become too emotionally involved.

Friends or Colleagues

Pro: They likely have a personal knowledge about the beneficiary's, and are trained professionals or have good business sense

Con: They may not have enough time to do a good job, may themselves pass away, or may have a conflict of interest when it comes to a business asset of the trust.

Professional or Corporate Trustee

Pro: Corporate trustees have the benefit of being professional, experienced, and objective, regulated and will not die.

Con: Corporate trustees are dispassionate, possibly ignorant of family dynamics, may be too conservative, and may have a high turnover of corporate trust officers.

Some clients use a team approach, considering that "two heads may be better than one,” or that they want a combination of professional and personal co-trustees. Unfortunately this tactic may only give the illusion of safety because it creates a trust that may be clumsy to administer.

What ultimately is important is selecting the person or persons you feel will be able to make good decisions. It is not necessary that they have significant expertise or experience with administration and investments, as long as they are capable of retaining qualified people to assist them. You want someone who has a similar philosophy and values as yourself, because they will be administering the trust for your loved ones.

I often use the story of how I selected my own trustee when my children were small. I have two brothers who I was considering as successor trustee. I asked myself what my brothers would say if one of my children came to the successor trustee and asked for a Porsche to drive down to Wayne State University for college classes. One of my brothers would have said "sure.” The other brother would have said, "You do need a car, but your dad would have bought you an Escort.” I of course chose the brother who took into consideration what I would have done in that situation.

Once you have selected successor trustees, the decision regarding whom to name as a personal representative under the will becomes much easier. Since the successor trustee and the personal representative will work closely with one another during the initial probate process many clients opt to name the same individual in both positions so there is no conflict.

Finally we do not want to forget that during the planning process you will also name individuals to make decisions on your behalf should you become incapacitated. You want to consider carefully whom you are naming under your Patient Advocate Designation to make medical decisions in the event you are incapacitated and whom you are naming under your Durable Power of Attorney to make legal decisions in the event you are incapacitated.  Again, it is important that those people you name have an understanding of your philosophy and values when it comes to making medical decisions, especially those "pull the plug decisions". You want to make sure that the person or persons you name will be able to make those decisions when the time comes, yet will not make them too quickly.

As you can see, naming people to administer your documents for your benefit and the benefit of your beneficiaries is as important as determining where you want your assets to go. If in the estate planning process, you find yourself unable to decide whom to name to these important positions your estate planning professional should be able to assist you in making these important decisions.