Assuming Roles of Trustee and Power of Attorney
By Jennifer Rossettini, CFP®
Your loved one has lost capacity and you are named in their Power of Attorney and/or Trust – Now what?
If you are fortunate, your loved ones have done their estate planning and put documents in place to enable a trusted person to assume the management of their financial affairs in the event of their incapacity. If you are that trusted person who has been named as an agent in a Power of Attorney or as the successor Trustee in a Revocable Living Trust, what are the steps that you need to take before you can fulfill those roles when your loved one has lost the ability to manage his/her own financial affairs? The answer is, it depends on the particular document.
If your loved one has a General Durable Power of Attorney which becomes effective as soon as it is signed, that is great news for you. There are no other hoops that you have to jump through before beginning to act on your loved one’s behalf. However, if the General Durable Power of Attorney states that it only becomes effective upon the principal’s incapacity, you have a little more work to do before you can act. You will need to get a written statement from a treating physician stating that your loved one is no longer capable of managing his/her financial affairs.
If your loved one has a Trust, things can become a little more complicated. You will need to read the Trust very carefully to determine how “incapacity” is determined and to what role the definition applies – your loved one as “grantor” of the trust or as “trustee” of the trust. Incapacity may be defined differently for each role. Most Revocable Living Trusts make provisions for what the Trustee can do with the assets if the Grantor, the person creating the Trust, becomes incapacitated. For example, the Trustee may be limited in how to make distributions from the Trust. Similarly, most Revocable Living Trusts make provisions for when a successor Trustee can be named. Usually, this is when the original Trustee, who is often also the Grantor, “fails to qualify or ceases to serve” as Trustee. This can be the result of the death, resignation, or incapacity of the Trustee.
Incapacity of the grantor is often defined as the inability of the Grantor to manage his/her financial affairs. On the other hand, incapacity of a Trustee is often defined as the inability of the Trustee to manage the affairs of the Trust. If you are attempting to assume the role of Trustee, it is very important to read the Trust to determine the exact language that the physician will need to use in the opinion letter or certification. The Trust will also dictate how many physician opinions you will need to get and from what kinds of physicians.
Once you have obtained the necessary physician letters with the appropriate language, you will need to do a few more things before you can go to the bank and assume responsibility of your loved one’s trust accounts. You will need to sign an Affidavit that outlines the facts surrounding the determination of your loved one’s incapacity and your acceptance of the role of Trustee. You will also need to sign a Certificate of Trust that tells third parties that you are the new Trustee. Some financial institutions will even require an opinion letter from an attorney that says the correct procedure has been followed.
When you are called upon to manage the financial affairs of a loved one and you’re not sure what to do, look to the document itself for specific instructions.
Ask Kit Kat: New to the Zoo
Hook Law Center: Kit Kat, what can you tell us about the new arrivals to the National Zoo in Washington, D.C.?
Kit Kat: Well, two mustachioed monkeys have made DC’s National Zoo their new home, having moved from the Como Park Zoo and Conservatory in Minnesota. They were introduced to the public on Oct. 23, 2019. They are brothers Poe (1.5 years old) and Fleck (2.5 years old). Technically, they are emperor tamarins which are known for their long white mustaches, which stand out against their grayish-black coats. They could give Colonel Sanders a run for his money—their mustaches are much longer than his! They each weigh about a pound, and that is considered full grown. If you want to see them, they are in the Amazonia forest exhibit. Their native home is in the Amazon basin which includes area in Bolivia, Peru, and Brazil. Tamarins are very social, and live in groups their entire lives. They help care for each other, until it is time for them to separate and form their own families. I am happy to say, this is one species that is not endangered. Their numbers are such that they are classified as “least concern” by the International Union for Conservation of Nature. However, if too much of their habitat would be destroyed, that classification could change.
Another new arrival to the zoo is a lesser kudu calf. Kudus resemble small antelope. Their coat is tan (reddish brown for females), but adults and calves have white stripes which run perpendicular to their spines, speckled by a few white spots. Males also have a spiral rack of horns when fully mature. The male calf, who is not yet named, was born Oct. 14, 2019. He has a 10-month old brother named Kushukuru. They seem to be getting along well, frolicking, and playing with dad, who is 9 years old. Originally from Tanzania, Uganda, Kenya, and Ethiopia, they have adapted well to captivity. The average lesser kudu lives up to 15 years in the wild, but can live about 5 years longer when protected. Their status is “near threatened” by the International Union for Conservation of Nature. About 100,000 exist in the wild. The National Zoo is lucky to have these beautiful creatures. (Dana Hedgpeth, “National Zoo welcomes a couple of mustachioed monkeys and a lesser kudu calf,” The Washington Post, Oct. 30, 2019)