Is there a bomb ticking quietly in your estate plan? The chances are good that there is, says Forbes in “Defusing The Time Bombs In Your Estate Plan.” The only question is, how big will that explosion be? The “bombs” are the people, or the individual, who you name to act on your behalf.
Whether they act during your lifetime or after you pass away, these individuals frequently can make or break your estate plan. They can determine the fates of family relationships and financial security. However, most people don’t realize the potential consequences of their surrogates’ actions. As a result, they don’t give sufficient thought to whom they appoint to these important roles.
Let’s examine some of the major potential surrogates:
Agent: This is the person who acts for you under a power of attorney or advance medical directive.
Trustee: If you create a trust, be sure to create some limits in the trust agreement. The trustee has the authority to make the final decisions about managing the investments, making distributions, paying taxes, and other aspects of managing the trust.
Executor: This person manages and distributes your estate, after you pass away. Also known as a personal representative, the executor is charged with carrying out the wishes expressed in your will and other estate planning documents.
Social Security representative payee: Social Security will appoint someone to manage the benefits of someone who is unable to do so; usually it’s a family member or friend. The beneficiary can contact Social Security and ask that a particular individual be appointed, and they will consider the request.
Long-term care insurance lapse designee: Most insurers now allow the insured to choose an individual who’ll get a notice, if the LTC premiums aren’t paid. You also can name an alternate payee who’ll receive and manage benefit payments, when you can’t.
Agent for funeral decisions: States have varying regulations about who can make funeral decisions, and some have laws recognizing the appointment of an agent.
Financial account designees: When opening a financial account, some people like to select the transfer on death (TOD) option, or they open joint accounts with a relative or friend. This allows someone else to manage the account, when he or she isn’t able and who will inherit it without going through probate.
Estate planning attorneys ask clients to make sure to tell their selected surrogates about their roles well in advance. If they don’t know they have been chosen and aren’t familiar with the estate or the decedent’s wishes, it makes a difficult situation even harder. Another issue occurs when the responsibilities and tasks of different surrogates overlap. When you make your decisions about who will act on your behalf, as yourself, honestly, do they have the qualifications and strong backbone to do what you’re asking them to do?
Review your choices with your estate planning attorney to make sure you’ve made these decisions wisely. You may also want to write a letter spelling out who you want to oversee what tasks.
Reference: Forbes (July 23, 2018) “Defusing The Time Bombs In Your Estate Plan”