Choosing Your Agent

As we design our estate plans, we often spend time (or should spend time) thinking about who is going to be the person who has the authority to carry out our plan if we are unable to do so. In my next few articles, I will be discussing what types of factors you should be considering for each document that is in a basic estate plan. Today I am discussing the Power of Attorney.

Refresher – What is a Power of Attorney?

As you may remember from my previous articles, the Power of Attorney is a document where you appoint a person as your Agent to handle your financial and business affairs.

What type of authority are we talking about?

The Agent would have the authority to handle decisions and affairs such as writing and endorsing checks from your bank account, speaking with your financial advisors, voting on your corporate share voting rights, moving your investments, selling your residence, etc. Of course, the breadth or narrowness of that authority is up to you since the assets and businesses are yours. These are discussions that you would have with your estate planning attorney prior to drafting the documents. The Agent has this authority only during your lifetime. The authority typically begins at the moment you sign the Power of Attorney, although there are some Power of Attorney documents that create the authority upon your disability or incapacity. No matter the type of Power of Attorney, the authority that the Agent has will end at your death or when you revoke the Power of Attorney.

So, who should be your Agent?

Well, sometimes the answer is crystal clear to clients. For instance, a husband may want his wife to handle his finances since the finances are comingled. Typically, I see clients choose their spouse, child, sibling, parent, or a professional fiduciary to act as Agent. To choose the best Agent for you, it is important to consider some important factors.

Ability to handle finances – Your Agent should be someone that you trust to handle your money and assets. If you do not trust them now, they are likely not a good fit for this responsibility. If your Agent has filed for bankruptcy, has substantial creditors, cannot balance his or her own checkbook, etc., then it may be a good idea to consider someone else who has better experience with handling money and assets.

Trust – You should trust your Agent to do the right thing with your money and assets. Your wealth, no matter the dollar value, should be used for your benefit. Your Agent should be a person that your trust to always use your funds for your benefit.

Location – It is best to have your Agent nearby, although it is not a requirement. With online banking and bill-pay, it has become increasingly easier for an Agent to live elsewhere. However, there are many other responsibilities that an Agent may have which may require the Agent to be close in region.

Family dynamics – Some people choose not to have a family member be the Agent to avoid issues with family dynamics. It is sometimes easier to have a third party act as Agent; someone who is neutral to the family, understands the liability issues of being an Agent, and can have a distant approach during difficult family dynamics.

What is a Professional Fiduciary?

A Professional Fiduciary is a person or institution that handles many client’s personal affairs, the most common being financial affairs. Typically, Professional Fiduciaries are banks, financial institutions, or trained professionals. The Professional Fiduciary gets paid from your assets, either at a percentage of the estate, a regular flat fee, or an hourly rate. Often banks or financial institutions will have a minimum estate value that they will administer, such as $250,000.00 - $1,000,000.00.

It is becoming increasingly common for Professional Fiduciaries to be named in estate planning documents. To find a Professional Fiduciary near you, I recommend speaking with your estate planning attorney or financial institution.

What not to consider

Once of the most common factors that I see clients use in their decision is the child hierarchy. For example, a client will choose their daughter for the sole reason that the daughter is the oldest in age. While this could be beneficial for maturity, it is not a factor that I recommend being a part of the decision as to who should be your Agent.

Take Away

When completing your estate plan, I highly recommend that you put thought into who will act as your Agent. It is a tremendous and honored authority to handle another person’s financial affairs, so it should be done by someone who understands the significance of the role and can handle the role to your rightful expectations.