How to choose the right people for key roles in Wills, Trusts, and Powers of Attorney
When you make a Will, Trust, or Power of Attorney, one of the first things you’ll need to do is appoint an Executor, a Trustee, or an Attorney.
Get this right and your best interests will be safeguarded whilst you are alive, with your estate handled correctly and with sensitivity when you’re gone. Get it wrong, and you could be setting yourself and your family up for considerable stress and financial loss, and in the worst cases, years of litigation and professional costs.
So how do you know who to choose? What are the main points to bear in mind, and what does each role consist of? Blake Morgan Partner Lisa Davies looks at what you need to know in this article, which was first published in Solicitors for the Elderly (SFE).
Wills
The person appointed in the Will to deal with the estate of someone who has died is called an executor. They have a number of steps to work through in order to fulfil their role. Firstly, they need to establish the extent of the deceased’s estate before calculating how much, if any, Inheritance Tax (IHT) is payable.
Once they’ve paid any tax that is immediately due, they can apply for the Grant of Probate which enables them to deal with the rest of the estate. The executor collects the deceased’s assets, from which they’ll be able to discharge all liabilities. These will typically include the funeral bill and any other debts owed by the deceased at the date of their death.
It’s important that the executor does not distribute the estate without first ascertaining the extent of all liabilities. If the estate is distributed prematurely, the executor could be personally liable for the remaining debts. Finally, they’ll be able to distribute money and other assets in accordance with the terms of the Will.
Lasting Power of Attorney
An Attorney under a Lasting Power of Attorney (LPA) has the legal authority to make decisions on the donor’s behalf should they lose the mental capacity to make their own decisions in the future. There are two types of LPAs: a Property & Financial Affairs LPA and a Health & Welfare LPA. The same people can be appointed for both roles, although they don’t have to be.
The attorney under a Property & Financial Affairs LPA will typically deal with the donor’s money (bank and building society accounts), tax and bills, property and investments, pensions, and state benefits. The Attorney under a Health & Welfare LPA can make decisions about the Donor’s medical care, where they live (for example, if residential care is required), and can even make end of life decisions.
Trusts
A Trustee is a person who takes responsibility for managing money or assets that have been set aside in a Trust for the benefit of someone else. As a Trustee, they must use the money or assets in the Trust only for the beneficiary’s benefit and ensure that they do not overstep the powers specified in the Trust Deed. They must also comply with any legal requirements, such as Trust registration and submitting tax returns.
Important things to consider
There are some practical considerations that run through all three types of appointment.
First, in the case of Executors, Trustees and Attorneys, the person being appointed must be over the age of 18 and have full mental capacity. They don’t have to live in the UK, but it helps if they do (in terms of speed of communication and ease of signing documents). In the case of trusts, there can be tax consequences if all your trustees are overseas residents.
Next, it’s vital to ask yourself whether you trust the people you’re considering appointing. This is fundamental as these are all “fiduciary” roles; i.e. they are based on trust and require those appointed to act honestly and in good faith.
It’s also essential where you’re appointing more than one person to act in each role that they get along. This doesn’t mean that they must be close friends, in fact, a certain degree of distance and independence from each other can be a positive thing. By having two truly independent people acting together (amicably), you benefit from two different perspectives; whereas sometimes a married couple or siblings may just “go along” with each other without challenging decisions.
In almost all cases of joint appointments, the holders will need to agree and act unanimously. If you choose people who cannot communicate effectively between themselves, then it is likely that decisions will be significantly delayed or possibly won’t be taken at all.
The people you choose also need to have the appropriate skills. Whilst it’s not necessary that they’re financially astute for example, as they should retain lawyers, accountants, and other professionals to assist them as required, it is desirable that they have a basic awareness of the task they’re being asked to perform. This will differ depending upon the role they’re given and the nature of the estate or Trust which they’ll be involved with; however, an ability to interact with providers of professional services, and good literacy, numeracy, and communication skills, will all help in the smooth operation of the estate, Trust, or Power of Attorney.
It is possible to appoint professionals to act for you in these roles. A solicitor will have the skills required to act impartially and will be insured to cover mistakes that may occur. However, the costs involved may not be proportionate or affordable, especially for smaller Trusts and estates. Family members or close friends can bring to bear personal knowledge of you as the testator of the Will, settlor of the Trust, or donor of the Power of Attorney, which can be invaluable in carrying out your wishes. A professional can act alongside a family member, or just be involved in advising them as they fulfil their role.
When planning for later life, it’s always best to speak with a professional, such as an SFE solicitor, who specialises in this area of law.
This article was first published in Solicitors for the Elderly here. If you need legal advice when it comes to appointing an Executor, Trustee, or Attorney, speak to one of our Success & Tax experts.
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