We’ve discussed a variety of documents and what they do, but not the practical details of how they operate. Documents of course can’t do anything on their own. They require a person or people to take action. These individuals who carry out the responsibilities in the documents are referred to as fiduciaries. They have what we call a fiduciary duty to someone else. For example, I as your attorney am a fiduciary. I have a duty to do things on your behalf and represent you to the best of my ability. If I breach that duty I can be held liable and lose my bar license. That same duty exists for the people you are putting in charge of things in your estate plan. If they breach that duty, they can also be held accountable. But keep in mind the old saying about toothpaste. It’s awfully hard to put it back in the tube once it’s out. Even if a fiduciary is held liable, the damage done may not be reversible. As a result, it is critical that the people you chose are trustworthy. Let’s go through the roles and discuss what each person would do and the factors to consider when selecting the right people.

Executor
The executor is the person who administers your probate estate. They are governed by your Last Will and Testament. But they are appointed to this role by the courts and their actions are overseen by the clerk of court through the probate process. As we discuss above, that process is arduous, time-consuming, and likely expensive. Whether you use a Trust or beneficiary designations, we largely want to avoid assets going through probate. As a result, our hope and intention is that the executor will have little to no actual role. But again, there are some scenarios that an executor may have to take action. First, you forget about an account or asset and either don’t name a beneficiary or fail to put it into your Trust. That account or asset will pay to your estate and have to be tracked and handled by the executor through the estate administration / probate. Second, you are killed by someone else’s negligence and your family successfully sues that person (think car accidents and medical malpractice). The damage the person pays are also paid to your estate and therefore handled by the executor. Finally, there are some limited situations where the executor will need to setup a Testamentary Trust for Medicaid purposes. We’ll skip getting into the weeks on that one. But the job of executor is largely administrative and the vast majority of executors hire an attorney who is paid with the assets of the estate to handle all the paperwork with the court.

Death Trustee
This is the person who administers your Trust after you are gone. Hopefully when you dire at 110 years old peacefully in your sleep, your kids don’t really need your money and have no issues. In that case, the Trustee will have a CPA file your taxes, pay off any debts, and split your assets into separate bucket for each of your kids. Then each kid will become his/her own Trustee and the Death Trustee you selected will be done. But that’s not always the case. If one of your heirs is underage, not competent, getting needs-based government benefits, in bankruptcy, or facing creditors, the Trustee you select may also have to manage money on behalf of that heir unless and until they get all their issues resolved. As an example, if that heir is a young grandchild or someone who will receive Medicaid for their lifetime, the Trustee may be handling assets for a very long time.

When selecting a person for this role the key characteristic is trustworthiness. If your heir is not capable of handling their own affairs, it is unlikely they will be able to strictly monitor the trustee. Ideally, the trustee you select will have a loving and caring relationship with the potential beneficiaries and not have any need for money. Hopefully you have several people that fit, but if not, we can discuss a variety of options like a corporate trustee or utilizing a trust protector. Once you have identified some trustworthy people, it’s fine to consider abilities and skills, but I encourage my clients not to worry much about that. Someone who is trustworthy and able to hire a CPA and financial advisor is a lot better than a brilliant money manager with questionable ethics. I would also encourage you to largely disregard age. While we hope you make it to 110 years old, it’s better to plan for the worst and hope for the best. If you were to pass away the day after the estate plan is signed, who would you want in this and the other roles? Is your dad the best person right now? Let’s rely on him. If something happens down the road and your dad is no longer able to serve, we can plan for that.

For each role, we want as many backups as possible. If something we to happen to your first choice, who is the next best and so on. It doesn’t cost anymore to add a list of backups. It’s extremely unlikely that we’d make it down to the fourth person, but if you have four people you trust for a particular role, let’s put them on there.

Durable or Financial Power of Attorney / Incapacity Trustee
The next job is the Power of Attorney. This is the person who will make decisions about your assets if you were alive but unable to do so. The person you select for this role will also be the incapacity trustee if you have a trust. That would allow them to step in as the trustee and handle assets in trust if you were not competent. Again, the key is trustworthy. The Durable Power of Attorney is a sweeping document that says the person you select can do anything you can do. I joke that if the agent you selected gets a hold of the POA, they can go down to the bank, empty all your accounts, sell your house, and move to Belize. And they could. Most people tell me that the people they’ve selected would never do that. They are probably right. But when I represented DSS in adult protective cases, I witnesses all sorts of crazy. I had an elderly person’s son marry a horrible lady who manipulated and convinced him to do all sorts of lousy things to his mom and her money. By the time we got involved, he'd burned through most of her life savings. It became clear that the daughter-in-law was the one who was pulling the string and the son was just signing whatever his wife told him to. But by then, it was too late.

I’ve had clients ask me if they really should sign a document giving anyone that amount of power. My advice is yes. Without this document, should you become unable to manage your affairs, the only option is for your family or the Department of Social Services to file a lawsuit against you alleging that you are incompetent. Like probate, we want to avoid lawyers and courts. Lawyers are obnoxious and expensive (trust me) and courts are no fun. The first part of the law suit would have the court appoint a guardian ad litem (another attorney usually) to come meet with you and potentially review your medical records and talk to your doctors. Then experts may be brought in, your medical records subpoenaed and a court hearing held for a judge to decide whether you are competent. If the court finds you incompetent, then another proceeding is started to decide who to put in charge of you and how much authority to give them. If the family can agree and the judge is okay, that may be easy. But if they can’t reach an agreement, the court will have to hear evidence of each person’s fitness. If the acrimony is bad enough or the court doesn’t like any of the people willing to serve, the court can appoint the Department of Social Services to be your guardian. Social workers are largely great people, but they are all overworked. I promise you don’t want them managing all your affairs. Whoever the court selects will also have to post a bond and make accountings and reports back to the court at least annually. Adding insult to injury, guess who pays for all this? Yep, you do. For the rest of your life, every penny you get or spend will be tracked by the court. Again, we want to avoid lawyers.

Thankfully, this document is easy. While the ones I draft are around 30 pages and encompass every possible thing we can imagine, if you don’t use me, you can get a somewhat lousy power of attorney for free. Just search online for “NC Statutory Shortform Power of Attorney.” The legislature has done a simple POA that covers a lot of basic situations. Even if you decide not to use an attorney, if you fill this document out and contact me for an appointment, I’ll be glad to notarize it for free at my office. No one should have to go through an incompetency and guardianship hearing.

Healthcare Power of Attorney
The Healthcare Power of Attorney is similar to the Durable POA, but there are some differences. Obviously, the HC POA deals with healthcare; what doctors, what procedures, what medicine, what facilities. The HC POA is also a springing document. You can’t delegate healthcare decisions to someone else unless a doctor decides you can’t make those decisions on your own. That may mean that you are under anesthesia or it may mean you are mentally out to lunch. Either way, once a doctor decides you can’t make the decisions, he or she will activate the HC POA and your agent makes the calls.

Again, the issue is trustworthy. Who do you trust to come down to the hospital, ask questions, get second opinions and spend the time to make an informed decision. But here, a little expertise is helpful. If you trust your sister and your niece, but your niece is an ER nurse and your sister is an accountant, maybe the niece should be the one to take on this role.

This document is also available for free from the NC Secretary of State. Just search online for NC SOS Healthcare POA. And like the shortform POA, if you decide not to use an attorney, I’ll be glad to have witnesses and a notary for free. Arguably, this is the most important job and document so please make sure you have this done ASAP.

Guardian
If you have minor children, its important that you nominate someone to serve as their guardian if you and their other parent were unable to take care of them. I love the good people who work for DSS Child Welfare, but let’s keep them out of your family. Even if you don’t have minor kids, I’d still recommend nominating a guardian. In my time at DSS I have seen grandparents adopt grandchildren for a host of reasons. Once again, it doesn’t cost anything to nominate someone and it doesn’t hurt.
I’m not going to spend a lot of time on the legal process of what happens if a child’s parents are both gone, but having a person nominated by the parent(s) can cut down on a lot of problems and stress and it gives the parents a little peace of mind to know a plan is in place.

Co-fiduciaries
Lots of people want to put all their kids into a role and have them serve together. I strongly recommend against that. Remember one of the biggest goals: keep away from lawyers and courts. If you have two people serving in a role and they can’t agree, what happens? Most likely, they are going to court armed with lawyers to fight it out. It’s a lot better to have someone holding the final decision-making role. We want and expect that our friends and family will work together to make decisions, but setting up a situation that can only be resolved by a court is not a good move. We do have some ways to create oversight for some of these roles though. If you are concerned that someone will make less than stellar decisions, we can discuss using a trust protector or dividing duties in the POA or requiring additional reporting. If you are just concerned about not hurting someone’s feelings, we may put one person in the role of executor, knowing that they likely won’t really have much discretion, but at least it makes them feel like they’ve been treated equally. These are the types of concerns that a good estate planning attorney can help you wade through.