Have you considered who will make your financial and health care decisions if you were to become incapacitated or who will manage your estate or revocable trust upon your death?

FINANCIAL POWER OF ATTORNEY. In this document, you designate an agent to act on your behalf during your life to handle your financial and business transactions. The power of attorney could be immediate or it could be “springing,” which means that it does not become active until you become incapacitated.

HEALTH CARE POWER OF ATTORNEY. When you designate a health care agent, this person has the ability to make medical decisions for you in the event you are not able to make these decisions for yourself. Also, in this document, you give directions to your agent related to life-sustaining treatment and organ donation.

REVOCABLE TRUST AND WILL.

If you are serving as the trustee of your revocable trust (for a further discussion of a revocable trust see the 2015 edition of The Advisor) and become incapacitated, the successor trustee will take over as the trustee and manage the assets in the revocable trust during the period of your incapacity. The revocable trust includes language that determines when you are no longer able to manage the affairs of the trust. For example, a physician could determine that you are no longer able to handle the duties of a trustee and this will serve as the trigger for the successor trustee to assume the role of the primary trustee.

Upon your death, the affairs of your estate will be managed by the personal representative (executor or executrix in some states) and the assets held in the revocable trust will be managed by the trustee. Duties include dealing with probate; settling the affairs of your estate and revocable trust; paying bills; filing your final income tax returns (Form 1040), income tax returns for your estate and revocable trust during administration (Form 1041), federal estate tax return (Form 706), if required, and state estate tax return if your state of residence has an estate tax and your estate is subject to this tax (South Carolina does not have an estate tax); and distributing assets from your estate and revocable trust. Generally, it usually takes at least a year to settle an estate and revocable trust and could take up to two years or longer depending upon the complexity of your estate and whether an estate tax return has to be filed.

It is advisable to name successor personal representatives and trustees; provide for a mechanism to appoint successors in the event of a vacancy; consider including a removal and replacement provision; and address the compensation of the personal representative and trustee. You should consider who you will name as the successor personal representative or trustee—will the office be held by your surviving spouse, child or children, relative, friend, attorney, accountant, bank, or trust company? In most instances, the attorney and accountant who were involved with the development of your estate plan will be involved in advising and assisting the personal representative and trustee during the administration process.

Your will designates the personal representative and the successors. Once the will is filed with the probate court in your county of residence, the probate court will appoint the personal representative by issuing a certificate of appointment (South Carolina), which gives the personal representative the formal authority to act for your estate.

Upon your death, the successor trustee named in the revocable trust assumes the role of trustee, usually by signing an acceptance. Unlike the appointment of the personal representative, the probate court is not involved with the appointment of the successor trustee.

If your will or revocable trust leaves assets in trust for a beneficiary (for example, a short-term trust to be managed for the beneficiary until he or she attains a certain age or a trust for the beneficiary’s life), you will have to name the trustee of this continuing trust and the same provisions mentioned above should be considered when deciding who to name as the trustee of this trust.

The roles of an agent under a financial power of attorney or health care power of attorney, a personal representative of an estate, and a trustee require someone who is diligent, trustworthy, and responsible. While a lot of thought and consideration are given to the distribution of assets and minimizing taxes, just as much thought and consideration should be given to who you designate to serve in these roles.

Article originally published in Furman University's The Advisor newsletter, 2017 Issue and is posted with the permission of Furman University. Visit www.furman.edu.