Executor. Trustee. Power of Attorney. Most of my clients have encountered these common estate planning terms before, but often they aren’t quite clear on the differences between them. It’s helpful to think of each term as a job title. Each “job” is similar in that all involve acting as a fiduciary (that is, being legally bound to act in best interest of the person they serve). However, a person taking on the job title of executor has a role and responsibilities distinct from someone serving as a trustee or a power of attorney. Because executors, trustees and powers of attorney all have an important part to play in most estate plans, understanding the differences between them is helpful when thinking through and crafting your own estate plan.
Your Executor is the person you nominate in your Will to carry out the administration of your estate (collecting your property, settling debts and tax obligations, paying expenses, and distributing your remaining assets according to the beneficiaries named in your Will). Older documents may also refer to an “Executrix” in cases where a woman is nominated to be the executor (executrix being the feminine form of executor). These days, many states, Washington included, actually use the more modern, gender-neutral term “Personal Representative” in place of executor or executrix. Here, I will continue to use the term executor as this seems to be the one that is most familiar to the majority of my clients, but just know that executor, executrix and personal representative are all job titles with the same job description.
Executors are often, but need not be, trusted family members. There are also professional fiduciary firms that can be hired to serve as one’s executor. In most cases, a Will names a primary executor followed by two or three backups in case the primary is no longer available to serve when the time comes. One can even name two or more people to serve as executor simultaneously (in which case each person would be a co-executor) but in most cases this is inadvisable as it makes delay, disagreement and conflict during the estate administration process more likely.
The Power of Attorney
Your Power of Attorney is the person you name in a power of attorney document to act on your behalf (usually in the event that you become disabled or incapacitated). Technically, the document itself the power of attorney and the person you name in that document is more correctly referred to as your “Attorney-in-Fact” (or, less often, your “Agent”). In other words, you sign a power of attorney in order to appoint an attorney-in-fact to handle your affairs (for instance, day to day financial and health care decision making) and your attorney-in-fact is said to act under (that is, by authority of) the power of attorney document that you used to appoint him or her. However, referring to one’s attorney-in-fact as their power of attorney is so exceedingly commonplace that I’ve taken to doing the same for the sake of easier communication with my clients, even if what is really meant is attorney-in-fact.
Unlike your executor, the job performed by your power of attorney is carried out while you are still alive. They are charged with handling your financial and medical needs on your behalf during your lifetime. A power of attorney’s authority to act on your behalf ceases on your death. When you die, the power of attorney’s responsibility (and authority) ends and, usually, that is when the executor steps in to administer your estate.
Like executors, powers of attorney are often trusted family members, but can also be someone from a professional fiduciary firm. Usually a primary is named and the naming of multiple backups is encouraged. Again, it is possible to name multiple people to serve simultaneously, but I often advise against this as it increases the chances of confusion, delay and disagreement.
Your Trustee is the person you name to be in charge of administering any trusts you create. A very brief and simple trust overview will probably be helpful here. A trust is, fundamentally, a relationship (of trust, hence the name) documented in writing where you, as the trust creator, appoint someone (the trustee) to hold and manage property for the benefit of yourself or someone else (the beneficiary of the trust). Trusts are normally created through a standalone document or, perhaps more commonly in Washington, as part of one’s Will. Not everyone will want or need a trust as part of their estate plan. For instance, if one’s children are all mature and responsible adults, then you probably don’t need to leave their inheritance to them in trust and instead can just give it to them outright. But if you have concerns about leaving property to someone outright (perhaps you have a disabled child who would not be able to manage his inheritance) then you may want or need a trust.
Assuming your estate plan involves a trust, one of the essential parts of any trust is the naming of the trustee —the person responsible for receiving the property you leave in trust and managing it in accordance with the terms of the trust. In terms of when the trustee’s responsibilities begin, this depends on when you create the trust. If you create a trust during your lifetime, then the trustee of that trust will be acting during your lifetime. If, instead, you create a trust through your Will, then that trust won’t come into effect (and the trustee won’t have anything to do) until after you pass away. Like with naming an executor or a power of attorney, it is common for a trusted family member to serve as trustee. However, because trusts can often involve managing large amounts of assets for an extended period of time, it is more likely (compared to a Will or power of attorney) that a professional fiduciary will be named to serve as trustee. Again, naming multiple backups is commonplace and encouraged, while naming multiple people to serve simultaneously, though possible, is generally inadvisable for the reasons stated previously.
Hopefully it’s clear now that your executor, power of attorney, and trustee, while all are fiduciaries legally bound to serve your best interest, each have their own separate and distinct role to play in your estate plan. At the risk of confusing things right here at the end, I will address perhaps the most common follow-up question I receive after I explain the differences between executors, powers of attorney and trustees: “Can the same person be my executor, power of attorney and trustee or do I need to name different people for each role?” It’s a good question and the answer is that it’s very common for one’s estate plan to name the same person to serve in multiple roles. For example, the following hypothetical is typical: John and Marie, a married couple around retirement-age, have appointed their adult daughter Stephanie to serve as their power of attorney during their lifetimes, in charge of managing their finances and making medical decisions for them if they ever lose the ability to do these things for themselves. Their Wills also nominate Stephanie to be their executor, in charge of administering their estate when the last spouse passes away. Finally, in their Wills they leave money in trust to provide for the college education of their newborn grandson Wyatt (Stephanie’s son). The trust terms written into their Wills name Stephanie as the trustee, in charge of managing those funds and eventually applying them towards Wyatt’s college education. Thus, it’s entirely possible, normal (and often makes sense) to name the same person to serve in each role when the appropriate time co
Disclaimer: This article and blog are intended to inform the reader of general legal principles applicable to the subject area. They are not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.
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