Appointing Positions of Trust in Your Estate Plan

Among the biggest decisions you will make while estate planning is who to place in various positions of trust to handle your affairs. These people are called “fiduciaries” because they have legal obligations to act in your interest.  This is one of the tasks involved in how to write a will. Below is a list of positions you may need to fill, and what each of them does.

Executor:

The executor is responsible for winding up your worldly affairs and carrying out the instructions in your will.  This person pays your final bills, finds and contacts your creditors, closes your accounts, takes care of your possessions and business until they can be sold or handed over to your heirs, and makes decisions about how and when to distribute your estate.  The executor can hire people to help, such as an attorney, a tax accountant, a financial consultant, etc., but all the decisions are made by the executor.

You should name two or more executors who can serve as substitutes if the first person you name cannot serve.  You can name co-executors, but that can be tricky as the two people will have to be able to cooperate with each other.

If you don’t name an executor, or if no one you named can serve, the court will appoint one. However, a court appointed executor must post bond.

Guardians:

If you have children under 18, you will want to name guardians for them.  There are several different scenarios.

  • If there is another parent alive, they will be put into the physical care of the parent, even if you name a different person.  If there are unusual circumstances, such as a parent who is incarcerated, has a history of abuse, or is mentally incapacitated, you should talk to your attorney about options for your children.
  • If there is another parent, but you are divorced or have never married the parent, that parent will get physical custody of your children, but you can create a trust for any money you may leave your children.  You can then name a trustee who will have discretion to distribute the money for the care of your child, and to distribute the money to the child as you instruct after the child reaches 18 or an older age.  You will want to name a trustee who is organized, trustworthy, and, preferably, knows you or your child.  However, if there is a large amount of money, you can name a bank or corporate trustee and appoint a family member or friend to act as consultant to the trustee in deciding how to use the money for your child.
  • If there is no other parent, you will name a guardian to take care of your child.  This person will be responsible for caring for and bringing up your child, and will have all the abilities that you as the parent have.  You can name an individual or a couple. If you name a couple, you must specify whether the guardianship changes if the couple is no longer married.  For example, you want your sister to raise your child, and so you name “Mr. and Mrs. Smith” as your guardians.  But suppose sister dies?  Did you really want her husband to raise your child even if your sister was no longer around?  Be clear about your wishes.
  • If there is no other parent, you will also have to name someone to take care of your child’s money.  This can be the same person you named as guardian to raise the child, but often it is not.  You may have one sibling who would be a wonderful parent, but is not very good at handling money.  You can name another sibling to act as trustee for your child. 
  • You do not need to name a family member as guardian or trustee.
  • If you fail to name a guardian for your children, the court will appoint one.  Guardians in this case are usually close family members.

Power of Attorney:

If you create a power of attorney for yourself, you will need to name someone whom you trust to take care of your personal and financial affairs.  This power can be used at any time you cannot take care of your own affairs, whether or not you are actually disabled.  However, this power ends at your death. Only the executor of your will can handle your estate.

Medical Power of Attorney:

You may name a person who can make medical decisions for you if a doctor certifies that you are not able to make your own decisions.  You can also name alternates who can serve if others that you name are not able to do so.

Trustee:

This person is responsible for carrying out the instructions in your trust.  The trustee makes decisions about distributing the money in the trust, in accordance with the guidelines you set up.  A trustee should be responsible and careful with record keeping.  The trustee, can, however, hire professional assistance as needed, such as on administration of the trust. 

 HIPPA form:

The HIPPA release allows you to name persons who may have access to your otherwise private health information.  In addition to giving the person access to doctors and hospital staff, this form is often helpful when a family member or friend wants to help in dealing with health insurance claims and other administrative matters during a health crisis or temporary disability.

 

Digital Assets:

Spend some time considering the various online accounts you have, as well as any websites, blogs, or sales pages, and decide which of these you need to provide instructions and access to.  Depending on your personal choices, these items may be dealt with in your will or in some other way, so initially you merely need to make a list of what you have, which accounts you want to leave access to, which you want to disappear, and what person(s) should handle each of these accounts.

Parker Counsel Legal Services helps clients in Texas, Massachusetts, New Jersey, and New Hampshire prepare estate plans for their individual circumstances. Find out how we can help you – schedule a short phone call, email us at legal@parkercounsel.com or call 833-733-2668

How should Batman’s parents have done their estate plan?

One of our best known vigilante crime fighters, Batman, was orphaned at the age of 8 when his parents were murdered.  He swore to dedicate his life to fighting crimes like that which killed his parents, and by the time we see him in adulthood he has spent millions of his billion dollar fortune designing and building crime fighting gadgets galore and an elaborate secret cave for operations headquarters. Let’s see how that might have come about.

What issues do the Waynes have?

They own businesses, so they need succession planning to make sure the company can continue running.

They have a minor son, so they need to plan for his care until he grows up and for how and when they will give him the money he will inherit.

What did they own?

We don’t actually know if the elder Waynes left a will or any other estate planning, but I would guess it was incomplete, at best, as I’ll explain below.  We know that they had enormous wealth in the form of a number of profitable companies falling under the umbrella of Wayne Industries. There was money and potentially company ownership from Mrs. Wayne in addition to Wayne Industries, but it is less clear how that was owned and managed. This means that in addition to planning for the distribution of their personal wealth, Bruce’s parents also had to prepare succession planning for their businesses and business interests. 

And of course, the most important piece of their planning, and where I suspect they failed, was in the management and distribution of their wealth and businesses to their son.

Businesses

The Waynes appear to have had at least some succession planning in place for their businesses, as we know that the companies weathered the immediate period after their death and that they were thriving many years later when Bruce was flying about the town on his bat wings.  This meant that the companies must have had either a corporate structure or a well written set of bylaws or partnership agreement for an LLC or partnership structure. In a corporation, the company itself has the ability to replace leadership, adjust to circumstances and operate independently of whether their officers or any of their shareholders died unexpectedly. The passing of shares is generally controlled by specifically created and adopted company policies, or controlled by state law. 

In the case of an LLC or partnership, where there are typically fewer people involved in the running of the company, a plan setting out who owns shares versus who has the ability to run the company is important to prevent infighting or take over by inexperienced leaders. The Waynes do appear to have prevented the demise of their companies through advance planning of some sort. While Bruce, as their only heir (if they did not have a will), would have inherited their interests in the companies, as an 8 year old he would have been unable to run them, requiring the parents to prepare for the possibility of their early death by having other adults ready to step into company leadership roles. Written plans, along with properly adopted bylaws and policies within the company, would have allowed for this.

Bruce

We know that Bruce inherited all or the majority of his parents’ estates due to the seemingly bottomless pit of money he has access to in later life.  Most people do leave all or most of their estate to any children they have before considering gifts to other relatives or friends, and the Waynes seem to have followed this pattern. If they had no will at all, then in most states everything they owned would go to their child.  But as an 8 year old, Bruce would not have been able to exercise control of any money or property at that time. The best way to provide for minor children is through the creation of a trust that will hold their inheritance until they are older and allow an appropriate person or trust company to manage the inheritance until the child can take over.  If the Waynes did not have a will that created a trust for Bruce, a court would have  created one for him.  In that situation, when Bruce reached the age of majority, which today is usually age 18 but may have been 21 if we are talking about the Golden Age Batman, he would have been give all the fortune outright, having complete control over management and spending of the money as soon as he turned either 18 or 21.

If the Waynes had created a trust in advance, they would have been able to delay Bruce’s access to the entire sum of money, and they would have been able to allow time for him to learn how to handle such a large sum responsibly.  Some parents direct the trustee to pay for higher education or down payment on a home or even a sum toward starting a business, but access to full control by the child is delayed until an older age or a life milestone, such as obtaining a college degree.  If the amount of the inheritance is very large, it may be released to the child in stages, so that some money comes under their control while the rest stays in trust and protected from the missteps of youth.

Basically, you can set the trust up to do what you expect you would do for your child if you’d been alive and they asked for money. 

I suspect that Bruce’s parents did not have a trust set up for him because it is hard to imagine that the ways in which he used his money would have been green lighted for loans or gifts by his parents.  “Hey Mom and Dad, I want to spend a big chunk of your hard earned money to dig a giant hole under our tower (I’ll pay an engineer to make sure it doesn’t fall down) and then try to invent super high tech comic book toys so I can confront highly dangerous and violent criminals all alone.  Is that ok?”  

I like to think Mom and Dad would, at the very least, have required Bruce to provide a proof of concept and marketability study before backing this particular hobby.  Which is why I’m pretty sure young Bruce had sole control over his money at about the same age many young men buy their first car and then roll it into a ditch.

If you want to keep your young super heroes safe and solvent and protected from their own passions, a trust for minor’s is definitely the way to go.

Ask the right questions about fiduciaries

One of the most difficult parts of estate planning is choosing the people you will name as your fiduciaries – that is, the people who will carry out your business.  The word fiduciary involves trust, and a fiduciary is a person who you trust to carry out the task for which you have named them.  In estate planning, you will name people to not only to handle your will, but also to handle your financial affairs in the case of your disability, to make medical decisions on your behalf if you are unable to do so, to take care of your children if you die, and possibly to take care of the money and property that you leave your children while they are minors or if they are disabled.  While you do need someone you can trust in all those roles, there are other factors that are important as well.

If you are lucky enough to have enough family and friends to have to make choices, in addition to the question “who do I trust” you should also ask the following questions to help you determine the best choices for your various fiduciaries:

  • Who cares about my child?
  • Who understands and respects my wishes?
  • Who knows when to ask for help?
  • Who is happy to hear suggestions from other people?
  • Who is careful about recordkeeping?
  • Who is good with money?
  • Who would step up to help even if you didn’t ask?

These and other questions like them will help you think through the people in your life and figure out who the best matches are for the various fiduciary roles in your estate plan.  If no one fits the bill, your attorney can help you figure out how to either provide extra support for your fiduciaries, or point you to professionals who can fill the roles.

Parker Counsel Legal Services serves families in Central Texas, Western Massachusetts, Northern New Jersey, and the New Hampshire Seacoast with special needs estate planning, special needs trusts, and guardianships. Contact us for a consultation at 833-RED-BOOT (833-733-2668) or legal@parkercounsel.com