Choosing The Right Fiduciary--Trustee, Agent, Personal Representative

In an article written September 10, 2012, by Jeanne Skowronski of the Wall Street Journal, Ms. Skowronski writes about the importance of choosing the right trustee to serve as the fiduciary of your estate.  Ms. Skowronski talks about four questions which she feels should be asked in deciding who should serve as fiduciary.  She asks:




- How large and complex are the assets in the trust?
- Can anyone in your family do the job?
- How are the relationships between your beneficiaries?
- Have you explored other options?




Here at Hughes Estate Group, we emphasize the great importance of choosing the right individual or entity to serve as the fiduciary of a person's estate.  We ask a series of questions in order to help you determine the best fiduciaries for your estate plan. 




We feel there should be much more deliberation in determining who should serve than simply naming your first born child for example or even the child most able to handle finances.  The relationships between siblings and many other issues also hold great bearing on who should be named as the individual or individuals to take care of your affairs at your incapacity or death. It is important to ask the right questions in deciding who should serve as trustee of your trust, or agent of your power of attorney, or personal representative of your will or estate. 

When Is A Power of Appointment Used?

Generally a power of apointment is used in estate planning.  For example, a donor may want to give authority to a fiduciary/donee to apoint assets in the fiduciary/donee's discretion to an incapacitated beneficiary.  A power of appointment can be included in a power of attorney, a will, or a trust.  Where a donor does not want to give a fiduciary a power of appointment, it is important to make that desire clear in estate planning documents in order to avoid an IRA argument that the assets the fiduciary is simply managing as a fiduciary are actually part of the fiduciary's estate for estate or gift tax purposes.

Moving To A New State With Estate Documents In Place

If you have estate documents (wills, trusts, powers of attorney, etc.) and you move to a new state, it is always good to have an estate planning attorney in the new state review your documents. A general rule of thumb is wills and trusts will less likely need to be amended with a move to a new state. Powers of attorney, especially health care, will more likely need to be amended to meet the new state's requirements.

Basic Stages of Life

There are three basic stages of life. Different estate documents are used for each stage of life.

The first stage of life is when an individual is alive and mentally competent. At this point in a person's life, not estate documents are necessary. However, this is the time an individual should put estate documents in place for the next two stages of life.

The second stage of life is when an individual is alive and mentally incapacitated. At this point, powers of attorney can be used to establish authority and begin acting for a person in the second stage of life. If powers of attorney have not been created, an individual seeking authority to act for a mentally incapacitated person must petition a court for that authority in a guardianship/conservatorship proceeding.

The third stage of life is when an individual dies. Once someone dies, the powers of attorney or a guardianship/conservatorship ends. At the point of death, trusts and/or wills are then used to establish authority and distribute a deceased person's estate to beneficiaries. If there is not a properly funded trust or there is only a will or there is no will at all, most likely authority to act on behalf of a deceased person must be sought through the probate court.

Definition of the Week: Fiduciary/Fiduciaries

Fiduciary/Fiduciaries: A fiduciary is an entity or person who manages your affairs if you are incapacitated or deceased. The word fiduciary is a general term referring to agents, personal representatives, or trustees.

The Basic Stages of Life

There are three basic stages of life when contemplating estate planning.

1. Individual is alive and mentally competent



2. Individual is alive and mentally incapacitated



3. Individual has died

Each of these stages is handled differently.

Individual is alive and mentally competent
When an individual is alive and mentally competent, estate planning documents can be in place, but most likely the documents are sleeping (or not being used) during this stage of life.

Individual is alive and mentally incapacitated
When an individual is alive but mentally incapacitated, there are certain estate documents that if prepared ahead of time allow family members to step in and begin acting on behalf of the incapacitated individual. The kind of documents that might be prepared for this stage of life are:

• health care power of attorney



• medical directive (pull-the-plug)



• health care directive



• financial power of attorney



• do not resuscitate (In Utah, an individual can only obtain a DNR by contacting a physician and filling out the DNR with the physician.)

If these documents are not in place before an individual becomes incapacitated, family members will go to court to obtain conservatorship or guardianship appointment in order to act for an incapacitated person.

Individual has died
When an individual has died, any powers of attorney used during incapacity becomes void and family members must turn to any will or trust that has been established to deal with this stage. If an individual has prepared a trust and/or will, family members can begin the process of accessing assets, paying bills, and distributing assets to the beneficiaries of the deceased person. If the person dies without estate documents in place, most likely the family members will need to go through probate to obtain authority to access and distribute any property of the deceased person.

In contemplating estate planning, it is important to be aware of the three stages of life and prepare for each stage.

Definition of the Week: Power of Attorney

Power of Attorney: A power of attorney is a legal document in which you give an agent the power to act as your attorney in the event you are mentally incapacitated and cannot act or speak for yourself. Sometimes people refer to a person as "power of attorney." That grates a little. It is easier and more correct to say, "John is my agent." Finally, you, the creator of the power of attorney, are called the principal. So, in brief, the principal designates a person in his or her power of attorney to act as his or her agent. Use these simple and correct terms on your estate planning lawyer and he will be impressed.

Financial Powers of Attorney Cont.--Part 3

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." Financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. Financial powers of attorney are as important as revocable trusts and deserve as much attention.

In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney when being used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.


2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.


3. A Power of Attorney will Not Prevent Family Power Struggles of the Principal's Assets.

In this blog, we will address the third point made by Ms. Whitton.

We disagree with Ms. Whitten's third point. We disagree based on our firm's experience. Yes, Ms. Whitton is correct that a power of attorney in itself will not make controlling family members suddenly loving, giving individuals. However, a well-drafted power of attorney that requires regular accountings and encourages constant communication can keep the urge to control from ranging out of control.

Definition of the Week: Principal (the person)

Principal (the person): In estate planning, this term most generally refers to the person who creates a power of attorney.

Financial Powers of Attorney Continued--Part 2

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." Financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. Financial powers of attorney are as important as revocable trusts and deserve as much attention.

In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney when used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.



2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.



3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal's Assets.

In this blog, we will look at the second point.

The most dangerous time in a person's life is when they are mentally unable to make decisions for themselves. The chances of being taken advantage of increases during this stage of life. And family members can be the worst perpetrators.

Most often it is family members who are named as the agent for an incapacitated person in a power of attorney. It is crucial that the individual acting as agent is trustworthy.

We have found that in addition to carefully picking the agent, agent accounting requirements adds a safety feature to a power of attorney. If an agent is accounting to the other family members on a regular basis regarding how money is spent for the incapacitated parent, it is less likely the agent will be skimming funds or paying themselves a very high agent fee.

Therefore, it is crucial that the agents are trustworthy. In addition, accounting procedures help facilitate an honest agent.

Comparing a Power of Attorney to Dynamite

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." In my opinion, financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. I think financial powers of attorney are as important as revocable trusts and deserve as much attention.
In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney as used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.



2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.



3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal's Assets.

In this blog, I will address the first point made by Ms. Whitton.

The first point is spot on. If a third party refuses to accept a financial power of attorney, then the power of attorney is not very effective.

A word about this first lesson in terms of Utah law. As of the date of this entry, there is no Utah statute or Utah judicial decision that requires a third parto to accept a financial power of attorney or that offers any statutory redress against a third party for unreasonably refusing to accept a financial power of attorney. Utah statutory law governing financial powers of attorney is quite basic, essentially recognizing and authorizing the use of financial powers of attorney, but not much more. (U.C.A. 75-5-501 to 504.)

Therefore, in Utah, if a client is incapacitated and if third parties will not accept a durable financial power of attorney signed by the client, then the named agent has only two options: the agent can sue the third party to force acceptance of the power of attorney or seek a conservatorship.

So the question is, what can be done in Utah to encourage third parties to accept financial powers of attorney?

I have asked the legal departments of Zions Bank, Wells Fargo, U.S. Bank, Key Bank, and Mountain America Credit Union what they are looking for in financial powers of attorney that encourage them to acknowledge the agent's authority to access the principal's accounts. The responses are summed up as follows:

1. First, are the formalities honored? Is the document signed and notarized? (A few of the legal departments said they would be impressed if the principal's signature was witnessed, even though there is no statute requiring witness attestation.)



2. What is the liability of the third party in accepting or rejecting the power of attorney? The less liable these third parties are, the more likely they said they would be in accepting the agent's authority under the power of attorney.



3. How recent and well-organized is the document? The more "fresh" and readable the power of attorney is, the more likely these third parties will accept it.

With these ideas in mind, I suggest that financial powers of attorney include language at the very beginning of the document that releases third parties from liability for accepting the agent's representatives regarding the validity of the power of attorney (and places liability for abusing the principal or the power of attorney squarely on the agent). I suggest this language include clear language as to what third parties are and are not obligated to do in accepting a financial power of attorney.

Check out our website to learn more about financial powers of attorney.

Craig E. Hughes

Definition of the Week: Agent

Agent/Agents: In estate planning, an agent is the individual whom you (the principal) name in a power of attorney to represent you if you are ever absent or mentally incapacitated.

Definition of the Week

Attorney: The word "attorney" simply means "representative." An attorney may be a person with a law degree, formally authorized to draft legal documents for others and represent others before judges. Or an attorney may be a non-lawyer or "attorney-in-fact" whom you name to represent you in a power of attorney.

Powers of Attorney

A recent NY Daily News article explains why it's so important to have a power of attorney. No one ever expects to become incapacitated, but it happens all the time. You should choose someone you know and trust who will be able to step in and take care of your affairs if you are unable to.

New York has passed new laws that change the rules about powers of attorney. Among the new rules: if you choose to give someone the right to make money transfers of more then $500, you will have to sign a separate statement witnessed by two people authorizing the person to make such transfers.

The new law will also allow you to appoint someone to monitor the actions of the person you name as your agen in a power of attorney, providing more checks and balances.


The new law covers new agreements; existing power of attorney statements remain in effect.

The New York law provides people with more protection, but at a cost. If you choose to use a lawyer, what may have cost you $200 before could cost $500 or more.

While many people find power of attorney forms at a stationery store or online, most lawyers consider that a bad move.

“You may not be protecting yourself as adequately as you should be,” The Daily News quotes Long Island Attorney Jennifer Cona said. “This is one of the most important documents you’ll ever sign. Don’t take it lightly.”

We at Hughes Estate Group would add that every term and concept found in the new New York law designed to protect consumers is already incorporated into our comprehehsive, 40-plus page financial power of attorney.

Read the article here

Speak for yourself later by writing it now

Why Do We Avoid Advance Directives?
By Paula Span

The day will likely come when your parent becomes to incapacitated to make choices about medical decisions. It could happen in ten years or ten months; you just don't know.

When it does you're going to want to know where the advance medical directive for health care is. Your going to want to know what your parents want you to do. You don't want to have to try and guess for yourself.

It’s startling how few Americans have advance directives. A Pew Research Center survey in 2006 found that only 29 percent of people had a living will; in 2007, a Harris study put the proportion with advance directives at two in five.

That can put both physicians and families in an awful bind. Sometimes, a hospital ethics committee has to get involved. Sometimes, courts and lawyers do.

If only the patient had left clear instructions!

So why don’t we?

One reason is that advance directives may be misperceived. People may equate such documents with limiting care, with pulling the plug. But that is only one (optional) aspect of it. Your living will can say anything you want, from pulling the plug in certain circumstances to including instructions to extend your life for as long as humanly possible under any circumstance. And anything in between.

Even with a directive, family members or doctors can challenge the decisions made on your behalf if they disagree. Your wishes will have a much better chance of being carried out if you spell them out clearly in your directive.

The rest of the article is here.

It is not complicated or expensive and many have forms you can do yourself. Utah's is here.

Practical Drafting Tips--Financial Powers of Attorney

This entry refers you to actual language I put in my financial powers of attorney.

In Wilson Rawl’s Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, “Dynamite comes in little packages.” In my opinion, the small, throw-away document known as a "General Durable Power of Attorney" or "financial power of attorney" is a little package of dynamite. Inadequate financial powers of attorney are at the heart of numerous explosive, expensive, and painful probate cases. At the same time, carefully handled, I think financial powers of attorney are as important and powerful in doing good as revocable trusts and demand as much attention.

I recently read an informative article about powers of attorney written by Linda S. Whitton, titled “Durable Powers as an Alternative to Guardianship: Lessons We Have Learned.” The article is found in 37 Stetson L.Rev. 7 (2007) and was revised in August 2008. The article can be downloaded from here

In sum, Ms. Whitton's article states three lessons learned about powers of attorney (I have changed the order):

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.

2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.

3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal’s Assets.

That first lesson is spot on (as the Aussies say). If a third party refuses to accept a financial power of attorney, then the power of attorney is not very effective.

A word about this first lesson in terms of Utah law. As of the date of this entry, there is no Utah statute or Utah judicial decision that requires a third party to accept a financial power of attorney or that offers any statutory redress against a third party for unreasonably refusing to accept a financial power of attorney. Utah statutory law governing financial powers of attorney is quite basic, essentially recognizing and authorizing the use of financial powers of attorney, but not much more. (U.C.A. §75-5-501 to 504.)

Therefore, in Utah, if a client is incapacitated and if third parties will not accept a durable financial power of attorney signed by the client, then the named agent has only two options: the agent can sue the third party to force acceptance of the power of attorney or seek a conservatorship.

So the question is, what can be done in Utah to encourage third parties to accept financial powers of attorney?

I have asked the legal departments at Zions Bank, Wells Fargo, U.S. Bank, Key Bank, and Mountain America Credit Union what they are looking for in financial powers of attorney that encourage them to acknowledge the agent’s authority to access the principal’s accounts. The responses are summed up as follows:

1. First, are the formalities honored? Is the document signed and notarized? (A few of the legal departments said they would be impressed if the principal’s signature was witnessed, even though there is no statute requiring witness attestation.)

2. What is the liability of the third party in accepting or rejecting the power of attorney? The less liable these third parties are, the more likely they said they would be in accepting the agent’s authority under the power of attorney.

3. How recent and well-organized is the document? The more “fresh” and readable the power of attorney is, the more likely these third parties will accept it.

With these ideas in mind, I suggest that financial powers of attorney include language at the very beginning of the document that releases third parties from liability for accepting the agent’s representations regarding the validity of the power of attorney (and places liability for abusing the principal or the power of attorney squarely on the agent). I suggest this language include clear language as to what third parties are and are not obligated to do in accepting a financial power of attorney. I have presented such language in my website under “Practical Drafting Tips,” which can be accessed at estateessentials.com

In regard to Ms. Whitton’s second lesson about the importance of trustworthy fiduciaries: again, spot on. Perhaps more on that in another blog.

As to Ms. Whitton’s third conclusion, I disagree. I disagree based on personal experience. Yes, Ms. Whitton is correct that a power of attorney in itself will not make controlling family members suddenly loving, giving individuals. However, I am convinced that a well-drafted power of attorney, required acceptances, and communication can keep the urge to control from raging out of control.

To this end, my clients have liked the term in my latest financial power of attorney requiring (during a limited time period after the client’s incapacity and upon pain of being disinherited at the client’s death) that all interested beneficiaries sign a document acknowledging the validity of the power of attorney and agreeing to be bound by all its terms. The document’s terms then include strict requirements imposed on both the agents (such as strict accounting and investment requirements) and the beneficiaries (such as strict requirements prohibiting the beneficiaries’ personal use of the client’s assets). I have personally experienced in meetings with an incapacitated client’s family how these terms and requirements defuse initially very tense situations that undoubtedly would have escalated into litigation with less thoughtful planning.

In sum, financial powers of attorney are as dangerous as poorly-handled dynamite if not well-drafted and thought out. But if carefully conceived and communicated, the financial power of attorney can effectively protect the client upon his or her incapacity, avoid the hassles associated with conservatorships (especially recently here in Utah), and preserve family relationships, or at least prevent poor relationships from disintegrating further.

Craig E. Hughes
As always I am interested in any comments you wish to post. Please keep them civil! Or feel free to call me. Please also review the Disclaimer at the top of the blog, which Disclaimer applies to this entry.

Do we need stronger power of attorney laws?

Any quick Google search will land you a handful of stories about abuse and betrayal. As America ages, elder abuse and financial exploitation are growing problems.

In Allentown PA a trial began for a couple who cared for an elderly man with Alzheimer’s disease, but in the mean time drained 85K from his accounts, buying a Mercedes, an SUV, and taking money to pay their taxes.

A soldier gave his wife a power of attorney before he left for Iraq. After he left she emptied his savings, sold the house and moved away.

In Erie the mother of a dying man used a power of attorney he signed years earlier to change the beneficiaries of his estate from his step-daughters to her own children.

In Connecticut a neighbor received Power of Attorney from a sick elderly woman and promptly empties her bank accounts.

In Upper St. Clair they are still sorting through the mess of a 16 million dollar estate after POA was given to a prominent lawyer

In Billings MT a state legislator was charged with defrauding her stepfather. She told the jury that she thought the man had only a month to live when she withdrew all of his savings.

Springfield Massachusetts woman was charged with stealing $813,000 from the 91-year old woman she had been caring for. An investment house sounded the alarm.

AARP has released a report on Power of Attorney laws and advocates for stronger laws that would make individuals who abuse Power of Attorney authority liable for damages among other changes.

Powers of Attorney are easy to abuse because they generally grant broad decision-making authority. Often exploitative transactions are well within the actual authority authorized. Often there is no third-party monitoring, and the abuse is discovered only when it’s too late.

The AARP is urging support for the New Uniform Power of Attorney Act finalized in 2006. So far that act has been enacted fully in two only two states, Idaho and New Mexico, and only a small number other states have provisions that are similar. In 2009, Colorado, Georgia, Indiana, Maine, Maryland, Michigan, Nevada, Ohio, Oregon, Pennsylvania, Virginia, and Wisconsin will consider adopting the law.

Some of the provisions the UPOAA . . .

1. Permit interested parties to petition a court to terminate the POA if the agent is acting improperly.
2. Set forth default standards for agents’ fiduciary duties.
Require express authorization for certain authority, such as gift-making and changing beneficiary designations.
3. Require notice by the agent when no longer willing or able to act.
Revoke a spouse agent’s authority upon annulment or filing for divorce.
Provide for remedies and sanction for abuse.

Here are a couple of comparisons of the Utah State Code versus the new Uniform Code.

UPOAA Section 108(a) & (b)

In a power of attorney, a principal may nominate a conservator of the principal’s estate or guardian of the principal’s person for consideration by the court if the protective proceedings for the principal’s estate or person are begun after the principal executes the power of attorney. (Except for good cause shown or disqualification, the court shall make its appointment in accordance with the principal’s most recent nomination.)

(b) If, after a principal executes a power of attorney, a court appoints a conservator or guardian of the principal’s estate or other fiduciary charged with the management of some or all of the principal’s property, the agent is accountable to the fiduciary as well as to the principal. The power of attorney is not terminated and the agent’s authority continues unless limited, suspended, or terminated by the court.


Utah Law

75-5-501

(5) A conservator may be appointed for a principal even though the principal has a valid power of attorney in place. If a conservator thereafter is appointed for the principal, the attorney-in-fact or agent, during the continuance of the appointment, shall account to the conservator rather than the principal. The conservator, pursuant to court order as provided in Subsection 75-5-408(1)(d), has the same power the principal would have had if he were not disabled or incompetent to revoke, suspend, or terminate all or any part of the power of attorney or agency.

Here are the sections on designating specific duties.

Section114(b) Agent’s Duties
(b) Except as otherwise provided in the power of attorney, an agent that has accepted appointment shall
1. act loyally for the principal’s benefit
2. act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in pthe principal’s best interest.
3. act with care, competence, and diligence ordinarily exercised by agents in similar circumstances
4. keep a record of all receipts, disbursements, and transactions made on behalf of the principal
5. cooperate with a person that has authority to make health-care decsions for the principal to carry out the principal’s resouagle expectations to the extent actually known, and otherwise, act in the principal’s best interest
6. attempt to preserve the principal’s estate plan, the the extent known, if preserving the plan is consistent with the principal’s best inetrest based on all reveant factors, including
a. the value and nature of the principal’s property
b. the principal’s foreseeable obligations and need for maintenance
c. minimization of taxes including income, estate, inheritance, generation-skipping transfer, and gift taxes
d. eligibiligyi for a benefit program, or assistance under a statute or regulation.
Section 201(a)
Requiring specific grants of authority to
1. create, amend, revoke, or terminate a trust
2. make a gift
3. create or change rights of survivorship
4. create or change a beneficiary designation
5. delegate authortiy granted under the POA
6. waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan
7. exercise fiduciary powers that the principal has authority to delegate
8. disclaim property, including a power of appointment.


Utah Law

75-5-503

A power of attorney may not be construed to grant authority to an attorney-in-fact or agent to perform any of the following, unless expressly authorized in the power of attorney:
(1) create, modify, or revoke an inter vivos revocable trust created by the principal;
(2) fund, with the principal's property, a trust not created by the principal or by a person authorized to create a trust on behalf of the principal;
(3) make or revoke a gift of the principal's property, in trust or otherwise; or
(4) designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal's death.