Today, I want to continue our discussion about estate planning. So, if you remember, estate planning is one of our two rails on the path to financial success.
Previously, we’ve talked about the basics of them. the documents that are involved. We talked last week about the order of transfers. And today I want to talk about the role of agents inside of your plan. What agents you’ll have, what an agent is and the good qualities of an agent you would want. As related to your estate plan.
So, first, what is an agent? An agent basically is someone who represents you. In terms of estate planning, you are the principal. You’re the one who owns all the property that you have. Well, if something happens to you and you are not able to dispose of or transfer property because of incapacitation or because of death, someone else must do that on your behalf.
We refer to them as. Some documents call them your personal representative. And so, these are the people that are, we’ll play a major role in your estate plan. And so, you want to choose wisely. So, what we’re going to do is we’re going to basically walk through all the different documents that you should have in a state plan, the different roles inside of there and Who you might want to choose for those.
So, let’s start first with the last will and testament. So as a reminder, your will basically directs what goes to whom and how and when. So, there’s three different ways things can be passed via the will, so one is specific bequeaths or bequests, which is a legal binding that basically says in your will, Person X gets possession Y and that is legally binding there.
That must occur inside of your will. Generally, there’s a residual clause which basically says, hey, after everything is given to certain people and charities and all my debts are paid and final expenses that whatever’s left. The money that’s left is basically given to certain people. There’s additionally a, what could be known as a side letter of instruction.
It’s basically a letter. It’s not legally binding, but it’s a letter that you could put accompanying your will. That basically says Hey, here’s what my wish is. Here’s my wants. Here’s my desires. It’s kind of a cheat sheet if you will. It may have things like burial instructions, whether to be cremated, whether, what you want to be buried with, and it might have other documents in there or instructions says, hey, give this to this person, that to that person, but it’s not legally binding.
It’s just kind of your wishes and your desires. So inside of a will, there are basically two to four different agents that you might have. One is the executor, which is a very significant role. Two is, the, the heirs or the legatees as they’re officially called. Basically, that’s who inherits property.
If you have minor children or children that need taking care of for special needs or other people that have special needs to be taken care of, you might have a guardian. And number four is you might have a trustee.
So, let’s unpack those a little bit more. The executor is the person who’s responsible for executing your demands.
Really? They’re not just wishes. They’re legally binding demands inside of your will. This person has a legal fiduciary responsibility. to conduct the business of what is written in your will. So, this is a major role. And this person is responsible for handling all your possessions and your estate. So, this is someone, that you want to choose very, very wisely.
You’re going to put into their hands, hundreds of thousands, maybe millions of dollars of. money and assets, you want to make sure that they are going to execute your wishes effectively. Now, what most people do is most people, husband and wife put their spouse as their executor, which makes sense because most things are either going to the spouse or they have the most awareness of that.
But you also want to have a successor executor, basically a backup, which says if me and my spouse die together, who’s going to be the backup, who’s going to be responsible for executing this. So again, you want to have someone designated there that’s good with money. That’s trustworthy. That kind of knows your information, the heirs, and the legatees.
These are the people who are going to inherit property. So again, it can be specific, specific item goes to a specific person that could occur in there. This asset goes to this person, or it could be from a residual perspective of., sell everything that I have and whatever’s left, divide, equally amongst these three people.
I have a client that basically took once all her wealth. She lists certain things to certain of her children, and then whatever’s left, she divided amongst her. I think she has 12 grandchildren. She denied it amongst her grandchildren that way. So, a whole bunch of different ways to do that. But you want to identify.
Who’s getting what? That’s the that’s that section. Okay. Now when it comes to guardians in, if you have minor children that need to be taken care of or special needs people need to be taken care of, you must appoint a caretaker. That person is referred to as the guardian. So, a couple, a couple of things to keep in mind.
If you have very young Children, keep in mind that, you’re responsible them for 18 years. So, if you give that to a caretaker who’s maybe in their sixties, for example, that person might be in there pushing into their 80s by the time your very young children are at the age of majority, that might not be a good choice.
So, for this person you want things to consider are their age how many children of their own do they have., so if you’re, if you have 2 or 3 children and you’re giving it to a family of 2 or 3 children, that could be 4 to 6 children, so that’s something to keep in mind.
You want to take into consideration, do they, does this guardian have the same ethical or moral background? Do they have the same values? Will they raise my children? Relatively the same way that I would, no two people are going to raise children in the same, but do they align to your values and things like that?
So that’s what the guardian would be. The last role would be a trustee. Again, if you have minor children or a special needs situation that you must accommodate for giving. that child or that special needs person, hundreds of thousands or millions of dollars might not be very good. They might not be able to handle it.
So, in that case, money will go into trust, and you would point a trustee to manage that money on behalf of that child or special needs person. We’ll do a whole episode on trusts a little bit later, but. And generally, this is someone who you would trust, they’d be responsible for handling the money, not the raising of the children, but handling the money on behalf of the children.
So those are the four different roles or agents you would want to identify inside of your will.
The next document that a lot of people. would have in their estate plan is a power of attorney. They come in two flavors, financial and medical. Let’s talk about financial first. There are two different types of financial power of attorneys.
The first one is specific. This is where you would point an agent to a, do a specific transaction on your behalf. So, for example, a lot of people have used. their lawyers to close on a property. They’re buying a property. They can’t be at closing to either buy or sell.
They’ll appoint their lawyer or their real estate agent to sign the documents on their behalf, but that’s all they can do. Sometimes I’ve seen it in the military where people transfer, they’re trying to sell their car, but they haven’t sold it left. They’ll leave a power attorney for someone else who’s still in that base to sell their car on their behalf, but they’re limited in scope.
based upon time or an event. The other power of attorney, financial power of attorney is a general power of attorney. This is a very, very, very powerful document. It basically gives an someone else the ability to do anything that you can do financially. So, if you can buy a house in your name, they can buy a house in your name.
If you can get a mortgage in your name, they can get a mortgage in your name. If you can sell a car or close bank counts in your name, they can sell a car and close bank accounts in your name. So, it’s very, very, very powerful document. So again, this is someone who would be very close to you, someone who you trust, someone who’s responsible, someone who would have your best interests at heart.
Generally, there’s two different times of when these can come into effect. Normally these are good for incapacitation where you’re in a coma, vegetable state, you can no longer handle your financial affairs. This is where you would have this document on hand. So, there’s two timings where it can take effect.
Either one, upon you signing the document, it could be in effect. Generally, not what I recommend. Number two is we make it a springing clause where it only becomes effective when you are deemed incapacitated.
The other power of attorney is that of medical. So, this is someone who can make medical decisions on your behalf. Again, under the presumption that you cannot. You’re incapacitated, you’re in a coma, things like that. Where you can’t make or convey medical decisions on your behalf. So, you would appoint a medical.
Power of attorney, giving someone the ability, an agent, the ability to make medical decisions on your behalf. So, think of things like exploratory surgery medicines that might be experimental. They’re in testing with the FDA, but they’re not approved. A doctor is not going to do those things without consent due to malpractice.
So, they’re going to go to you to help convey to give them permission. Well, if you can’t do it, somebody else must do that on your behalf. This is where that person would step in and do so.
The last document that most people would have in their estate plan is that of a living will or an advanced medical directive.
This gives the permission to someone else to terminate life sustaining treatment. So, let’s say you’re on a respirator or on a feeding tube, things like that.
This document would give permission to someone else and give the ability and authorization to remove.
, that life sustaining treatment essentially terminating your life. Now, this came about, you may have remembered it or may have heard of it from a popular case, sadly, in the state of Florida. A lady named Terri Shriveau. So, Terri Shriveau. Had a heart attack in the early nineties, 1990, that caused some severe brain damage for almost eight years.
They tried to revive her and bring her back without success. Her husband Michael at the time petitioned to have the feeding tube removed. She had already been on life support for almost eight years, but her parents came in and basically interjected and said, no, Michael’s position was Terry won’t want to live this way.
Her, her parents were taken at the opposite position saying that, she would want to live. She wouldn’t want to commit suicide., she was a devout Catholic, things like that. And so, for another seven years, these two entities went to court battling back and forth. They petitioned all the way to the Supreme Court of the state of Florida.
Governor Jeb Bush at the time got put in place. President Bush got involved. I mean, this was a big mess. Basically for 15 years, this lady was on life sustaining support from 1990 till 2005 while her parents, her husband fought in court and so she was at the mercy of all these other people, you don’t want to do that to your family,
so, this is a very, very important document, whether you want to be on life sustaining or not is totally your decision. But here’s the thing. You need to convey that to somebody because they don’t know. These are other people trying to decide on behalf of Terry because they didn’t know what Terry wanted and each Terry couldn’t convey it.
Right. I’d also point out that. This agent is very important from a, this is a very emotional position, think about husband and wife, or if you appoint a child of this, essentially, you’re giving them permission to end your life, that’s a lot of responsibility and a lot of emotion that’s put on that person.
So, it doesn’t have to be your spouse. It doesn’t have to be a child. It can be, it could be a friend. It could just be a person that, a colleague, something like that. So just keep in mind that this is, this is very emotional. Now, the one of the ways I frame it is, if I had to do this to Erica and I had this document in hand, I know what her wishes are, regardless of what my wishes, my wishes might be to keep her on life support.
If her wish is just to take her off, I can say, to the doctors, I’m doing this, and it helps me emotionally process it because I’m doing what she wanted. Not what I wanted, so again, very, very powerful document very emotional, but the important thing is to have it because if not, it just leaves everybody unknown.
Nobody knows what you want if you don’t communicate it. Now let’s talk about some qualities you would have in all these agents, some of them are more important than others. But they are all, important in different ways. Okay, so I refer to these as the three C’s. So, the first one is character.
The people that you choose, ideally you want them to have good character. Meaning that they’ll do the right thing. They’ll follow your guidance. They’ll complete your tasks. Alright, they won’t steal money from the estate. They won’t take possessions. They won’t rip off the heirs. They’ll basically do what you’ve Instructed them to do, and you can trust them that they have good solid integrity.
They’re honest, they’re trustworthy people, that’s number one characteristic. Number two that you’d want is that of competence. For example, your executor is going to make financial decisions. You want someone who is. Financially astute they don’t have to be a genius. They don’t have to be a, CPA But you don’t want them to be illiterate and bad with their own money and then handling hundreds of thousands on your behalf So, think about the executor.
They’re going to sell property. So, people that have sold cars, sold houses they can do some accounting for things. They can pay your taxes. They’re going to have to do your last tax return. If you have an estate tax return, they’re going to have to do that. They’re going to have to close out stuff.
So, you want them to be pretty completion-oriented type of people. One of the nice things about working with me, I tell clients is., I will work with that person, walk them through start to finish and help them as they engage in your estate. So, some level of competence, again, if you have a person who’s, a nurse or a doctor in your life, that might be good for that.
medical power attorney., so just choose wisely there. You want people who are competent for your caretaker. You want people who are good with kids, if people, you don’t want to put a caretaker who hates kids, that’s probably not going to be a good option. It’s probably not going to work out.
So, you want competent people in those different roles. And the last C to think about is capacity. Capacity to handle this stuff. It’s going to take time and space and energy and commitment. So, if you think of your executor, they’re going to have to probably come to where you live to sell property, close accounts.
If they live halfway across the country, they’re going to have to leave their family, take time off work, potentially travel down there. That’s going to be a lot. They might not have a lot of capacity. So, you might want someone more local, for example. The caretaker could be far away because the kids could go to them.
They don’t have to be local. Medical power of attorney, again, talk about having the emotional resilience, the emotional space to handle a decision like that. So, you want people that have Character, competence, and capacity in those different roles.
So, your micro action for the week. Review your estate documents.
Look at those different roles and see who are the agents that you currently have in them. And ask yourself, are they still the best option for this role? And if not, let’s figure out a better option. Or if they’re still good, perfect.
One pro tip that a lot of people kind of get hung up with is, it doesn’t have to be family.
It can be, and family’s a great choice, but it doesn’t have to be. It could be colleagues that, it could be people you have relationships with, it could be friends, it could be church members, it could be social people you hang out with, doesn’t have to be kids, doesn’t have to be parents, it could be extended family.
Things like that. When you only look at family, you limit the scope of who to choose from. So again, family is great choice. But some of you might not have family or your family just not, might not be good handling this stuff. So, you want to look. Maybe explore outside of the boundaries of family. So that’s your micro action for the week.
Take some time, look at your documents, look at those roles and ask yourself, given the situation today, is this still the best person for this role?
Today we talked about the documents that are involved in a state plan. We talked about the agents inside of them and the three Cs to consider when choosing your agents.
I hope this information is helpful for you and helps you on your financial journey. If you have any questions, please put them below or you can send an email to Mike@truewealth.show.
And until next time, I hope you have a great day.
