We get many questions on the difference between an Agent under Financial Power of Attorney and a Successor Trustee.  These questions usually arise after a bank or other financial institution won’t accept the Financial Power of Attorney or Trust document presented.  Each document addresses a different type of ownership.  This blog post provides a brief explanation of the difference between the two.

A Trustee is the person or entity that protects and manages assets owned by a Trust. The Successor Trustee usually takes power when the person that created the Trust either becomes incapacitated or has died. The Successor Trustee only manages assets that are owned by the Trust and has no control of assets outside the Trust.  If an account is owned by a Trust, the Trustee is the appropriate party to manage that account, and the Trust document (or pertinent pages) or Certification of Trust are what should be presented to the financial institution holding the account.  Trustees generally have the authority to manage all trust assets and make distributions to or for the benefit of the trust beneficiaries as set forth in the Trust document. When a Successor Trustee needs to replace the prior Trustee due to their incapacity or death, the Successor Trustee typically uses an Affidavit of Appointment of Trustee with a new Certification of Trust and presents the same to each financial institution holding trust accounts.

Even when a Trust is fully funded (meaning all assets that should have been transferred to the Trust have been), there are assets not controlled by the Trust. Such assets include IRA and 401(k) accounts, some annuities, and other assets that are not normally transferred to a Trust. With a Financial Power of Attorney, an Agent is nominated to manage those non-Trust assets.  The Agent named in your Financial Power of Attorney (sometimes referred to as an “Attorney-in-Fact”) will also be able to take care of all other non-Trust business.  For instance, if you become incapacitated, someone will need to file your taxes, potentially sign or break a lease, manage payments from pension providers, manage retirement accounts (e.g., 401k and IRA accounts) and address other non-Trust financial transactions relating to things like cell or cable bills, insurance contracts, or the like. Even with a Trust, it is important to also have a Financial Power of Attorney.

Your Agent has all powers enumerated in your Financial Power of Attorney; some documents grant broad powers, while other, less comprehensive documents, do not.  A Financial Power of Attorney may either be effective immediately, or upon incapacity as evidenced in writing by physician(s).  Upon death, the powers enumerated in the Financial Power of Attorney cease.

It is important to have properly drafted estate planning documents.  Well-drafted documents can avoid court involvement and numerous other headaches.  It is also important to understand how each document works if you are handling someone else’s financial matters as a Successor Trustee or Agent under Financial Power of Attorney.  For example, if you present a Financial Power of Attorney to the bank seeking authority to manage an account titled to a Trust your request will not be honored. Conversely, as Successor Trustee you will have no authority to manage the 401k, which will be owned by the individual and not his or her Trust.

If you need to put a proper plan in place, or have your plan reviewed to ensure it is up to date, call our office for an appointment with one of our experienced estate planning attorneys. In addition, if you are acting as Successor Trustee or Agent under Financial Power of Attorney you have a fiduciary duty imposed upon you by law, and may be liable to others if you do not properly manage or account for your handling of financial matters.  We also routinely represent individuals and entities who serve in a fiduciary capacity, if you would like legal advice to assist you in meeting your obligations and fiduciary duties, our knowledgeable attorneys would be happy to help guide you.

-Andrea L. Claus, Attorney at Law