SERVING AS SUCCESSOR TRUSTEE OR AGENT UNDER A POWER OF ATTORNEY

SERVING AS SUCCESSOR TRUSTEE OR AGENT UNDER A POWER OF ATTORNEY

By: William R. Remery, Esq.

A member of the National Academy of Elder Law Attorneys

In my estate planning practice, I am routinely called upon to update clients= trusts and powers of attorney to change the names of their successor trustees and agents, as friends and relatives die or move away.  These and other life events frequently prompt people to substitute in new people to assist them in the event that they can no longer handle their own financial affairs. Unfortunately, I rarely get the chance to speak with those executors, successor trustees or agents until after they have taken over for their friend or relative who has died or become incapacitated. In the best cases, that person contacts me shortly after they take over their position and I can guide them on the best way for them to carry out their duties. More often than not, I do not hear from them until they have received a nasty letter or even a lawsuit demanding information and documentation and/or accusing them of misappropriation, elder financial abuse or other improper behavior.

            The person naming the successor trustees and power of attorney agents is called Athe principal.@ The trust or power of attorney involves their own assets and they can pretty much do whatever they want to do with those assets, including making gifts, spending money of frivolous things, investing in speculative business enterprises and even gambling the money away. They are not required to keep receipts to account to anyone for what they do with their own money. The person named as the successor trustee or agent under a power of attorney is called Aa fiduciary@ meaning that they are not handling their own assets but are entrusted with the assets of another person. The fiduciary owes the principal a special duty to protect the assets and utilize them solely as directed by the principal for the principal=s benefit. The fiduciary is not allowed to benefit from himself or herself, except for receiving a reasonable fee for services actually rendered. Unlike the principal, the fiduciary must protect all assets by making certain that insurable assets are properly insured, investing only in Aprudent@ investments, securing the assets preventing others from accessing or misappropriating them, and keeping scrupulous records of all transactions so that every penny of the principal=s assets and income can be documented and traced. Upon request of the principal or another interested person, the fiduciary must produce a written accounting and provide receipts, invoices or other records to support all transactions.

            While some fiduciaries take their obligations seriously, I find that often a fiduciary will deal with their principal=s assets in the same casual way they deal with their own, using ATM cash withdrawals or electronic transfers of funds and paying for things with cash, without obtaining receipts or keeping documentation to show the ultimate disposition of that cash. Credit cards are used for purchases without noting exactly what was purchased. It is not unusual for a child to commingle their own funds with their parents= funds and then make joint purchases from those commingled funds, which makes it impossible to determine how much the parent actually benefitted from the combined transactions.

            This year alone, I participated in two full-court trials, in each case defending a different dedicated daughter who cared for her mother during the mother=s final years and helped the mother with her finances, often spending the daughter=s own funds for the benefit of the mother. In each case, they were accused of misappropriating money from their mother, living rent-free in the mother=s home, and otherwise benefitting at the expense of their mother. (In each case, the accusations came siblings who provided no care for their mother during her life!) The court process was expensive, incredibly stressful and, although my clients were substantially vindicated, they were surcharged for cash transactions they could not justify with written receipts and the entire process tore the family apart, perhaps permanently.

            The moral of the story is that good intentions alone will not protect you from personal liability if you agree to serve as a Afiduciary@ for someone else. It is a noble, selfless thing to step up and help a relative or friend in need. However, you must understand that it will be held to the same standard for record-keeping and accountability as would a banker, broker or other professional handling someone else=s money. If you do accept a position as a fiduciary for someone else, you must take your fiduciary duties seriously. Consult a CPA if taxes may be owing and perhaps for help in setting up an accounting system, consult an insurance agent to make sure that all properties are insured, consult an investment advisor to make sure that investments are diversified and prudent, and consult an attorney to make sure that all legal notices are sent and other statutory requirements are met. While I encourage people to help their family and friends, and while doing so can be very gratifying, the most fitting warning for those who undertake to help others with their finances is found in the proverb Ano good deed goes unpunished.@ 

            Mr. Remery is one of the founding members of The Wellness Village, Visit his page at http://www.parkinsonsresource.org/the-wellness-village/directory/william-r-remery-esq/, watch his video and be inspired to do your long term care planning. He is only a phone call away.