“For richer or poorer…” those infamous four words that have been repeated in many spousal arguments and probably in many divorces as well. At the time we say them, we wish to give our partner and our children or future children, everything we have. However, when it comes to designating your financial helpers, one should consider issues beyond the marriage vows. As discussed in our last blog “Part 1: In sickness and in health: healthcare vows”, the helpers you pick in your Estate Plan are tremendously important.
Part of your Estate Planning documents are designating your Trustee to your Living Trust and/or designating a Financial Power of Attorney. People often choose their spouse, oldest child, sibling, or the first person that comes to mind, even though that person may be the wrong choice for this role. You have to be very deliberate in your thought process in considering the strengths and weakness of the people or financial institution that you are considering in the financial role.
Financial What Ifs
This person or institution will handle ALL of your money which includes:
- collecting your money (paychecks, rents, government checks, etc.)
- paying your bills
- managing your investments
- taking care of your residence, automobile and other property while you are in a hospital or care facility.
If they squander it, if they mishandle it, if they apply it for their own desires or if they mismanage it, that could create tremendous difficulty for you. You also may be residing in your home and not have the mental capacity to handle your financial affairs.
As discussed last time, you may be disabled for some period of time due to health concerns. You may fully recover and regain control over your finances but if the wrong person had control in the interim, a lot of damage could be done.
Financial Roles and Duties
When you choose your Trustee to your Living Trust or your Financial Power of Attorney, you have to remember what their roles and duties will be. If you are sick, debilitated or medicated and unable to handle your financial affairs, the Trustee or Power of Attorney you choose could have a huge impact. Things you need to consider include:
- Will this person follow your desires as opposed to their own emotional desires? (Remember a Trust should contain instructions for what happens if you become mentally disabled. A Power of Attorney rarely has any instruction of any kind.)
- Do they have the tenacity to push back against the bank or financial institution when that financial institution tries to push them around? (They are not the bank’s client.)
- Does the person or company have the financial acumen to handle the day-to-day details of paying your bills, taking care of your property, following your investments, and supporting your loved ones or charities that you are currently supporting?
- Do they have the strength to say no, if your family or loved ones want to take some of your money while you are incapacitated?
- Do they have the tenacity to push through and follow your desires as opposed to the recommendations of another family member or someone else who thinks that a different use of your assets should be taken, as opposed to what you stated in your Trust?
- Do they have the “stick-to-itiveness” to push back against family or professionals, who may want to freeze or lock down your assets, as opposed to maintaining them, and continuing to manage and grow your assets and investments?
When I am talking with clients about who they want to be their Trustee of their Trust, I advise them that they want to choose someone who can handle their financial affairs and what they own in the event they are unable to due to mental disability or they have passed on.
You want to choose someone who will follow your instructions, your desires, and your themes in life. I will touch my heart and my head and ask, “Are they Trustworthy?” “Are they Competent?” The person or people you choose, will have to have not only the mental capacity, but the ability to follow the details and the willingness and moral strength to do so. They may be handling your financial affairs for some period of time.
You will also want to choose someone who can recognize a scam, even those perpetrated by our own family members. Unfortunately, financial scams upon our elderly are rampant. The ability to recognize a scam is very important.
My mom has been mentally unable to handle her financial affairs for a number of years due to Vascular Dementia and Parkinson ’s Disease. She will also sign anything you put in front of her. At age 94 her handwriting is still better than mine.
We have turned on the “Mental Disability” provisions under her Living Trust, so that the Trustee can handle her financial affairs. This includes everything from paying her bills to managing her investments, bank accounts, and any other assets of any kind or nature.
Mental Disability and Financial Responsibilities
You always want to do “Mental Disability” planning in your Living Trust. That is something we do inside our client’s Living Trust that you cannot do inside a Will.
You may want to use a financial institution to be the Trustee of your Trust, if you do not have a person who is thoroughly competent to handle your financial affairs. You also may use them to avoid fighting among your adult children. If the adult children do not get along well enough, and there is animosity (remember Greed is one the seven deadly sins), a Trust Company, might be the best answer.
When you are choosing a person or Trust Company to be your Trustee of your Living Trust (or your Financial Power of Attorney, in the event you do not have a Trust), you want to make sure that you have someone who has the right temperament for the position. Again, this may be somebody who might be handling your financial affairs for a decade or more if you become mentally disabled. You want to make sure that it is someone who can dig through the details of handling your day-to-day financial affairs, including paying bills, handling bank accounts, dealing with investments, taking care of your property, taking care of your residence, automobiles and all of your assets. Also, they need to have good judgment so that they know how those assets should be handled and whether or not they need to be sold, in the event you will never be able to drive an automobile again, or if you will never return to living in your home.
These are difficult and tough decisions. You will have to have someone who is strong enough to act in your best interest. They must be someone who is going to be able to handle the detail and have the courage to push back against r family members who will have different opinions. They must have the moral compass to follow your instructions. They must be someone who will act in your best interest, not their own.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.