Putting it all together.

Understanding the importance of the team work that is involved in managing one’s financial, legal, property and health care affairs is important.  Hypothetically speaking, let us consider a husband and wife whose estate plan involves a revocable living trust, powers of attorney, and health care directives.  How will the persons whom the couple has legally empowered to act on their behalf need to cooperate with one another?

Even though husband and wife are still healthy and able to manage their own assets as co-trustees, they may nonetheless choose to delegate certain responsibilities that they feel others are better able to manage.  Fortunately, their trust allows them to delegate certain responsibilities either to one spouse entirely (as co-trustee), to a special trustee (i.e., another trustee with authority over specific assets), or to special agent(s) who act on behalf of the co-trustees.   As trustees and settlors, the couple always has the power replace any agent or special trustee who doesn’t work out.

Specifically, the couple decides that managing their brokerage investment accounts and rental real properties (all of which assets are owned by the trust) are areas of responsibility that they wish to transfer, either to one spouse alone (the one with the business experience) or else to hired professionals.   The trust contains provisions that authorize the couple (as co-trustees) to delegate authority either to each other or to someone else.  Anyone else who acts would do so either as a special trustee or a special agent of the trustees.  Such special agents would need a special power of attorney, signed by one or both co-trustees regarding their delegated duties, when dealing with financial institutions.

For example, the couple might hire a trusted certified financial planner to manage the brokerage accounts and hire a property management company to collect rents and manage the rental properties.   The financial planner could be an independent financial advisor who is expressly authorized in the couple’s trust document to make discretionary investment decisions.   The real property management company would act as a special agent of the trustees in managing the rental properties.

          Later, when neither spouse is able to manage their own property and financial affairs, the person(s) named as successor trustee and power of attorney for financial and property affairs would step in to manage affairs inside and outside the trust, respectively.  The power of attorney for financial affairs and the successor trustee, who can be the same person, need to work together in harmony. The power of attorney often looks to the successor trustee to make additional resources (inside the trust) available to pay for the health care and living needs of the couple.   The successor trustee will usually require the written authorization of the couple’s power of attorney for any gifting instructions (as relevant) to authorize the gifting of major assets, such as in the context of Medi-Cal planning.   Moreover, the trustee may ask the power of attorney to transfer assets inadvertently left outside the trust into the trust in order to avoid a later probate.

          Next, the couple’s agent(s) under their advance health care directives and power of attorney for personal care will look to the trustee and power of attorney for financial affairs to pay for health care treatments and living arrangements that they have authorized.  Initially, the successor trustee will also need the health care agent’s assistance to obtain a physician’s certificate of incapacity to establish that the settlors are incapacitated – the usual prerequisite to the successor trustee stepping in.

          Clearly, getting one’s affairs in order entails selecting and authorizing the right people to step in at the right time.  Understanding how they must work together helps you to select people who can work together to realize your goals.