Deciding whom to name as power of attorney, executor and possibly trustee is something that baby boomers are finding they need to do.
Guess who is often the first check point for making this very important decision?
It’s not the attorney, say experts. It’s the boomer’s trusted financial advisor.
That means financial advisors need to be up to speed on the relevant issues and be prepared to discuss them without offering legal advice. Some ideas follow.
The power of attorney is named to act on the boomer’s behalf for legal and financial purposes (typically, but not always, when one is incapacitated). The executor is the person named to handle the boomer’s estate. The trustee is the person or entity that handles the boomer’s trust on behalf of the boomer.
“The legal work always takes place at the law firm,” stresses Hamilton Poynor, president of Poyner & Associates, Inc., Brimingham, Ala. “But we work side by side with the attorney, the client and the accountant too,” he adds.
Often, says Poynor, the advisor’s role is to help air considerations about family relationships, the financial documents that may be impacted, and the financial goals and objectives that might be affected.
“It needs to be a coordinated effort,” agrees Michael Altman, a certified public accountant and senior financial advisor with Ameriprise Financial Services, Inc., Dunwoody, Ga.
Once a year, he says, the advisor and client should go through the various documents that name beneficiaries, POAs, trustees, and so on, and ask “are these up to date,” and “do you want or need to make any changes?”
If the last review was 10 years ago, a lot will have changed, Altman explains.
For instance, if the children were teenagers during the previous review, they may now be age 20 to 25 or more. “If so, many parents will start considering making the kids executor, trustee, etc., he says.
Sometimes, the discussion makes clients realize they have lost the documents, forgotten their location, or failed to let their children know they have such documents and where they’re located, Altman says.
And sometimes, the boomer realizes that some documents still name an ex-spouse for certain roles, he says. When that happens, Altman says he tells the client “you probably don’t want your ex to be here.”
The important thing, says Altman, “is to talk about estate planning strategies” when bringing up the topic of who holds, or should hold, powers for the boomer.
“You don’t want to start talking about the legal agreements themselves,” since that is the job of the attorney, he says.
Helping clients with this decision is “a huge responsibility for the financial advisor,” says John Schwan, principal of Schwan Financial Group, LLC, Aberdeen, S.D., and an agent with New York Life.
It’s also a big responsibility for the boomer to select the person to perform these duties, he says.
“Some people think it’s a favor, to be named (or to name someone) as executor,” he points out. “They take it as recognition of respect and trust.”
When that is the case, “clients need to be educated on how big a job this is going to be,” Schwan says. The advisor should help the boomer see that “this matters.”
Many boomers just assume that a family member will and can perform these functions, say advisors.
But, depending on state of domicile, that may not be the case, unless the family member has the relevant legal document, Schwan cautions. For instance, if a close family member wants access to the boomer’s safe deposit box but lacks a document allowing that, he or she may have to go to an attorney and go through the legal process to make that happen, he says.
In the end, the large majority of clients do select family members to hold POAs, executors and other powers, say the experts.