Choose Your Trustees, Agents and Health Care Proxies Wisely

This week, a colleague asked me to review a trust for her. We were concentrating on the tax provisions. But what struck me most of all were the provisions concerning the Trustee.

There were instructions to the Trustee about what to do if the beneficiaries engaged in drug abuse. There was a provision about how to handle the house, because the client had feared that one sibling might use the house as a tool to bully the other. Then, to my surprise, the siblings were named as the successor co-trustees. Wow. That was odd.

As the name suggests, appointing a trustee requires trust. You have to trust that the person you appoint is going to fulfill your wishes and going to be fair with your beneficiaries. The same concept applies to appointing an agent through a power of attorney and a health care proxy or health care agent through an advance directive. If you can't trust the person, then you are giving that person way too much power.

This is where family dynamics come in. In way too many cases, people choose trustees, agents or health care proxies because they don't want there to be hurt feelings. One sibling was chosen over the other as trustee, so that must mean you favor that one. Quite frankly, I think those types of considerations should be given minimal weight in the grand scheme of things. The primary consideration should be do you trust this person to do the things you want done, while being fair to the beneficiaries. If you fear that the person you want to appoint will bully others, then you've made the wrong choice. If you appoint co-trustees because you fear one will bully the other, then you are forcing two people to work together who probably shouldn't. Again, you've made the wrong choice.

In most families, choosing an adult child as a decision-maker or fiduciary is a good choice. But, if your family dynamics is such that you cannot trust siblings to work together, then you need to make another choice.

Here are some considerations I give to my clients when choosing a trustee. Number one, trust. Can you trust this person? Number two, age and health. Is this going to be a person who will be around and able to act when you get sick or pass away? Number three, proximity. If you want a decision to be made quickly, then it may be advantageous to have someone who lives nearby to be the decision-maker, and not the adult child who lives on the other coast or on another continent.

Sometimes, we come to a point where it is clear that a friend living close by is a better choice for fiduciary than an adult child. If that is the case, don't be afraid to hurt your family's feelings. This is an important choice for you, not for them.

We Specialize in Small Estates

Are the executor or personal representative on a Virginia estate worth more than $50,000, but less than $200,000? These estates are particularly troublesome, because you still have to file inventories and accountings, and pay the Commissioner of Accounts filing fees as well.

We specialize in assisting with small estates, and doing it at a price that is reasonable. We have a good working relationship with a fiduciary accountant who can prepare the filings at an hourly rate that is lower than an attorney's rate. Attorney rates will only be charged for court proceedings, and reviewing the filings before they are submitted to the Commissioner of Accounts Office.

If you are responsible for an estate that is worth less than $200,000, contact William J. Kovatch, Jr. now for help.

Special Needs Trusts and Your Will

A colleague asked me when a special needs trust is written into a will, does a new document creating the trust need to be drafted. I answered that if the trust was created properly, then no.

However, this raised a separate question for me. Why was the special needs trust created by will, as opposed to a living trust?

To back up, a special needs trust is an instrument to make funds available to benefit a person with disabilities, so that the person would not be disqualified for public assistance. It must be drafted and administered properly, or else the funds in the trust can be considered resources, and thus disqualify the person for government programs such as Medicaid.

The problem with writing a special needs trust in the will is that the will has to be probated. Once the will is probated, here in Virginia, the Commissioner of Accounts for that county will be responsible to oversee the administration of the trust. This will necessarily involve the filing of inventories and accountings, filing fees, and the expense of hiring professionals, such as a lawyer and accountant, to make sure the filings are done properly. All of this can add to the hassle and expense of administering the trust.

A better way to handle the desire to make a special needs trust as part of an estate plan is to create the trust as part of a living trust. That way, upon death, the trust does not have to go through probate, and you do not have the watchful eye of the Commissioner of Accounts over you.

If you want to benefit a person with disabilities through your estate plan, it is best to consult a lawyer experienced and educated in special needs trusts to assist you and create the most efficient plan for you.