Which Estate Planning Document Do I Use—and When?

Estate plans often include several documents: a revocable living trust, will, financial power of attorney, advance health care directive, and other supporting documents.

For a successor trustee, agent, or other fiduciary, the important question is not simply, “Am I named in the estate plan?” The better question is:

“Which document gives me authority to act in this situation?”

The answer usually depends on two things: whether the person is living or deceased, and what asset or decision is involved.

Key Takeaways

 

• A revocable living trust generally controls assets titled in the name of the trust.
• A financial power of attorney allows an agent to handle authorized financial matters during the principal’s lifetime, but is not an authority to handle assets in a revocable living trust
• An advance health care directive addresses medical decisions.
• A will directs the disposition of probate assets after death, but a named executor generally needs court appointment before acting.
• Being named in a document does not necessarily mean your authority has started.
• When in doubt, identify your role and determine how the asset is titled before acting.

The Trust: Managing Trust Assets

A successor trustee generally uses the trust when managing property titled in the name of the trust.

Depending on the trust terms, the successor trustee may step in after the current trustee dies, resigns, becomes incapacitated, or another event specified in the trust occurs. Once authorized to serve, the successor trustee may manage trust bank accounts, investments, real estate, expenses, and distributions.

The successor trustee may also need to sign an Acceptance of Trusteeship and provide a Certification of Trust to banks, escrow companies, or other institutions as evidence of authority. California law allows a trustee to use a Certification of Trust in place of providing the entire trust instrument in many circumstances.

One important point: being named as successor trustee does not automatically give someone authority over everything the person owns. If an asset is held individually or passes by beneficiary designation, a different document or procedure may apply.

Financial Power of Attorney: Acting During Life

A financial power of attorney allows an appointed agent to handle authorized financial and legal matters during the principal’s lifetime.

Depending on the document, this may include paying bills, managing individually owned accounts, handling tax matters, or assisting with real estate and other financial transactions.

Some powers of attorney are effective immediately, while others become effective only after a specified event, such as incapacity. The document itself should be reviewed before the agent begins acting. California recognizes these types of “springing” powers of attorney.

As a general rule, authority under a financial power of attorney ends at death. At that point, authority over trust assets generally shifts to the successor trustee, while assets requiring probate are handled by the court-appointed personal representative.

Advance Health Care Directive: Medical Decisions

An advance health care directive is used for health care decisions.

 

The directive does not give the health care agent authority to manage bank accounts, sell property, or administer the trust. Those responsibilities arise under other estate planning documents.

A related or incorporated HIPAA authorization may also allow designated individuals to obtain medical information, even though access to information and authority to make health care decisions are not necessarily the same thing.

Will: Handling Probate Assets After Death

A will directs how assets subject to probate should pass after death and generally nominates an executor.

However, being named as executor does not by itself give someone authority to act on behalf of the estate. When formal probate is required, the court appoints a personal representative, and court-issued Letters are used to prove that authority to banks and other third parties.

A will also does not normally control assets already held in a trust or assets that pass directly by beneficiary designation or another nonprobate method.

One Person, Different Roles

It is common for the same person to be named as successor trustee, financial agent, health care agent, and executor.

But those roles are not interchangeable.

While someone is living, you might be acting as their agent under a financial power of attorney or advance health care directive. After death, you may instead be acting as successor trustee or, following court appointment, as executor.

Before signing documents or contacting a financial institution, ask:

 

• What role am I acting in?
• Has my authority under that document begun?
• Is this asset owned by the trust, the individual, or does it pass another way?

Those three questions will often point you toward the correct document.

Bottom Line for California Families

Estate planning documents are designed to work together, but each has a different job.

A successor trustee should use the trust for trust assets. An agent under a financial power of attorney handles authorized financial matters during life. A health care agent uses the advance health care directive for medical decisions. And an executor handles probate assets after receiving the required court authority.

Knowing which hat you are wearing can help avoid delays, rejected transactions, and confusion at a time when families already have plenty to manage.

We Can Help

At Pederson Law Offices, we help California families and fiduciaries understand their estate planning documents, determine when their authority begins, and identify the appropriate next steps when administering a trust or estate.

If you have been named as a successor trustee, agent, or executor and are unsure which document applies, we can help you understand your role and responsibilities.

Please note: This blog post is for informational purposes only and does not constitute legal advice or create an attorney-client relationship. Consult with a qualified attorney at Pederson Law Offices for advice regarding your specific circumstances.