Many people, when planning their estates, run across the above three terms which are often confusing to them, but important to know. They have important differences which you need to understand in order to have an effective estate plan.
What is a trustee? If you have a revocable living trust, the person who is in charge is called the trustee. You will usually be the trustee of your own trust, but you also should name one or more people to succeed you if you cannot do the job. The trustee has important responsibilities to those named as beneficiaries, including providing an accounting of income and expenses, filing tax returns and monitoring investments.
What is an executor? In your will, you will name somebody as executor of your estate. Your estate in this case means probate estate and is governed by state laws. A probate estate has assets in your name only (not joint tenancy or transfer on death) and do not include retirement plans. The executor’s job is to collect assets subject to probate as governed by state law, pay debts, and distribute the rest of the assets according to the will. The trustee and executor can often be the same person. The executor is not responsible for assets inside a revocable living trust.
A trustee is typically a longer-term position and can often last for many years, depending on the terms of the trust. An executor is usually a short-term position and will often last only 12 to 18 months. When the executor has completed their tasks, the court will discharge them.
What is an agent under a property (or financial) power of attorney? The agent acts on your behalf while you are alive for assets that are outside of the trust. This can include all of your assets if you do not have a trust and will include your cars, retirement plans and life insurance if you do have a trust. You will typically name a family member as agent and at least one and preferably two successors. You can only name one person to act at a time. Co-agents are not permitted on the standard form and are not recommended.
You need to think carefully about who you will name to these positions. They carry important responsibilities and are responsible for managing and distributing assets. If you make a bad choice, the result can be disaster. There are several important characteristics that you should consider in selecting people.
First, you should only name somebody who has the time to act on your behalf. Each of these positions can be time-consuming. Second, these people will deal with beneficiaries of the estate as well as third parties such as banks or stockbroker. They should therefore be able to get along well with others and can disagree with them without being disagreeable. Finally, they should have some business sense or be able to ask for assistance in dealing with finances.
In this time of Covid-19 it is important to make good choices and update your estate plan, so it gives peace of mind to you and your family.