Estate Planning

Are you considering appointing multiple children to be in charge of settling your estate? If so, then today’s episode is for you. Tom discusses the pros and cons of having multiple children serve as your trustees or agents under powers of attorney. And, he explains the difference between appointing them as joint-trustees or co-trustees.

Audio Transcript:

Should you have joint trustees? When you’re putting together your trust, if that’s what you’re going to have as part of your estate plan, you’re looking at naming successor trustees. Who it that’s going to settle your trust after your death? Of course, we’re also talking about, who’s going to be the personal representative under your wills? Who’s going to be agents under your financial power of attorney? Who’s going to be agents under your healthcare power of attorney? Who’s going to be appointment to make funeral arrangements for you? So we’re looking at naming these different individuals, and, oftentimes, clients who have children are going to ask, whether it is better to appoint one child or perhaps multiple children as a joint trustees or as joint agents or personal representatives, et cetera.

So where do we start? Well, we’re going to start with the first question. If you’re considering appointing multiple children, the first question is how well do your children that you’re looking at appointing get along? If, for example, there’s already discord in the family, then having multiple children serving can get ugly very quickly because now you’re taking children who don’t already get along and you’re forcing them to work together.

From experience, that does not improve the chances that they will get along. In fact, just the opposite. They will fight even more than they are already did when you were alive when you’re calling upon them to work together, to settle that estate after your death. And, obviously, if that leads to fights between the children, it can increase, certainly the legal expenses that are going to be incurred in settling your estate.

So if, your goal is, as most clients, to maintain family harmony after your death, in that case, then appointing multiple children who already don’t get along is not going to accomplish that goal.

On the other hand, If your goal is to maximize family disharmony, then appointing multiple children who do not get along will accomplish that. We did have one client where that was part of his estate planning goal. He wanted his children to fight tooth and nail after his death because he thought they didn’t treat him well enough during his lifetime. That was his way of giving them their comeuppance after his death.

Now something else to think about. You might be considering appointing multiple children as your agents, under powers of attorney. It could be your financial power of attorney or your healthcare power of attorney. If you think about that, now you’re appointing children who will be called upon to act on your behalf while you’re still alive. You’re still alive, but you’re incapacitated. Someone needs to make medical decisions for you. Someone needs to manage your finances. It can certainly really be bad for you if the children don’t all get along.

If you’re confident they will continue to get along after your death, then having children, perhaps as joint trustees or as joint personal representatives or joint agents might be appropriate for you.

The next question though, you will have to decide, is do you want them to serve as joint, co, because you’ll have those options? What’s the difference? If you have two or more children serving as for example, co-trustees then any one of them can take any action that needs to be taken by a trustee without the involvement or agreement of the others. That’s the concept of co, they’re all equal. They all can do whatever needs to be done independently of the others. Joint, on the other hand, means that any action that needs to be taken has to be taken by all of them together.

Let me give you an example. Let’s say you have real estate and the real estate has to be sold after your death. If you have children as co-trustees in charge of your trust, then any one of the co-trustees can execute documents necessary to complete the sale. On the other hand, if you have them as joint trustees, then they all would have to sign the documents, including all the documents that are required at the closing.

Your decision between co-trustees and joint trustees could be impacted by where your children are living. If there’s a considerable distance between them, then co-trustees might be more appropriate because it might be more difficult for joint trustees to have to travel and get together to take action in settling your estate.

Of course, though, if you want them to all oversee what each other is and make sure everyone is doing the right thing, then you might want to consider appointing them as joint trustees.

So you have to make some decisions. If you’re going to have more than one, are they going to serve as joint, or are they going to serve as co.

The same considerations are going to apply if you’re going to have multiple children serve as personal representatives, as agents under your durable power of attorney, as agents under your power of attorney for your healthcare, etc. You can have them joint, or you can have them co.

Now, when don’t we recommend joint agents? We don’t recommend joint agents under your power of attorney for health care. Why? Let’s think that one through. Here’s the problem. You need medical treatment. You need medical decisions made for you in your not able to make the decisions for yourself. So your doctor is going to look at your power of attorney for healthcare and decide who does he or she needs to talk to. Well, if you have named multiple children as joint agents, then your doctor is going to need to talk to all of the joint agents and get their agreement before rendering treatment. Why? Because they’re all joint. That’s what you’ve said to the doctor. I want you to work with all of my children. They all need to agree on what my treatment is.

Well, you don’t really want to find yourself in the emergency room where quick decisions need to be made for your treatment, but they’re not able to make them because the doctor’s unable to contact all of the agents wherever they happen to be. Or they’re not able to get all of the agents to agree as to a course of treatment.
That is why we don’t recommend joint agents under a health care power of attorney. If you’re going to have multiple children under your health care power of attorney, it is much better then to have them as co agents so that they all have equal decision-making authority. So the doctor can talk to whoever is available.

Remember, whatever you decide about multiple children, whether they’re going to be joint or whether they’re going to be co, you need to make sure that your documents are clear as to whether or not multiple fiduciaries are joint and have to work together, or are co with the ability of any one of them to work without others. Why? Here’s what we find frequently. Banks will treat multiple fiduciaries or multiple agents as joint, unless the documents clearly indicate that they have authority to act independently.

So let’s say you just had that power of attorney prepared and it says I appoint Bob and Sue and Johnny as my agents. Well, most banks are going to interpret that as appointing them as joint, meaning they all have to participate in any action with the bank. So if you want them to be co where any one of them can do that, that needs to be clear in the document so that the bank will recognize in that case that they can work with any one of the children.

[Order your new Certificate of Trust today at our [Legal Store]

What is a certificate of trust? Well there have been two different distinct certificates of trust up until a recent change in Michigan Law that combined them into one. For those of you that have had a trust prepared for them, you would normally also have a document called a certificate of trust, and that certificate of trust summarized some of the important information from your trust such as the date it was created, who the trustees are, who the successor trustees are, the name of the trust et cetera? And, the purpose of that certificate of trust was to be used for funding your trust. So when you went to the bank and you said hey I want to put the Trust on as a beneficiary on my account, the bank would require a certificate of trust, which was a summary of the trust information, and that was done in lieu of providing the bank with an actual copy of your trust document.

So that was one type of certificate of trust. It’s a certificate of trust that generally speaking we recommended everybody that had a trust prepared for them had a corresponding certificate of trust. 

The other certificate of trust was actually called a certificate of trust existence and that was a document that a title company would require to be prepared and recorded at the time a trust was selling real estate. So if you had transferred your home into your trust, and you were then going to sell your home one day or the trust was going to sell your home, the title company would require a certificate of trust existence.  And there was a specific Michigan Statute that said here’s what that certificate of trust existence has to contain.

Stepping back, that certificate of trust that you had just as part of your estate plan, there was no statute that said what that had to contain. The certificate of trust existence, though, that had been required by title companies to be recorded when a trust wanted to sell real estate, had very specific requirements under the statute.

So they were two separate documents and serve two different purposes. You would generally find that a title company when it came time to sell real estate would require that new certificate of trust existence. 

Well, Michigan decided to simplify matters and to, by way of legislation, develop one certificate of trust that now is used for both purposes. One certificate of trust that you can use when you are funding your trust, and the same certificate of trust that a title company will now require when it comes time to sell real estate. So, the new statute combines them both into one and calls that one document a certificate of trust.

The statute sets out a number of requirements that a certificate of trust now has to contain. Those include: 

• the name and date of the trust
• the date of each what is called operative Trust instrument, which is any amendment that would have been made to the trust
• not just the name, but the address of the current trustees.
• the power of the trustee as it relates to the purpose for which the certificate of trust is being offered. So for example, if you were going to use this new certificate of trust at a bank, the certificate of trust would have contained the powers of the trustee relative to banking. If the certificate of trust is going to be used sed by Title Company when it comes time to sell real estate, it will have to include the powers of the trustee relative to selling real estate. What we’ve opted to do is to include all of the powers that a trustee has under Michigan law so you can use one certificate of trust for all purposes that a trustee has authority to perform under Michigan law. 
• whether or not it is revocable, and if revocable, indicate the name of the person who can revoke it.
• if you have co-trustees, then the certificate of trust has to indicate whether or not anyone of the co-trustees can operate and make decisions as a trustee without the other co-trustees. 
• And finally, if it is going to concern real estate, then it has to contain a legal description of the real estate to which it applies. 

Now why is it then that perhaps you might need a new certificate of trust? 

Well here’s what is happening. What we have found from discussing with clients and contact with different Financial establishments, and this is this is kind of the way that the world of banking and the world of credit unions works. When a change in the law occurs there will be a law firm that is Corporate counsel for the bank or the credit union. And part of the job of that law firm is to keep the bank current, keep the credit union current, about changes in the law relative to them and their customers. So what happens in a situation like this is that law firm will normally put together some sort of a document sending it off to the bank or the credit union, and in this case advising them of the change in the law requiring certificates of trust. What normally then happens is not do they just advise them about the change, but they will often times create a checklist if you will, and the checklist probably says something like look in order for you the bank or the credit union to accept a certificate of trust from your customer regarding a trust that they have that is somehow now going to be related to their bank account, these are the things that have to be in that certificate of trust. That’s to make it uniform throughout the bank and the credit union, and to make it easy on the tellers. They don’t have to know the statute. They don’t have to know what changes. They just have pull out a form that says, okay, here’s what a certificate of trust requires. And what they normally do then is they go through that checklist and if everything on that checklist is there then they’ll accept the certificate of trust. If something on that checklist isn’t there, then in all probability, they will say no we cannot accept that certificate of trust, which means you cannot then make the trust the beneficiary on your bank account or credit union account or put the account in the name of the trust until you come back with an appropriate certificate of trust. 

So when that happens, and we had that happen with a client recently, we were not provided with a copy of the checklist, but it was pretty clear what was going on when they went through the checklist. They looked and said hey the certificate of trust that had been prepared in that case years ago years ago when the trust was first created, and years ago when it was first used for funding at that bank, when the client went back to the bank to do something else related to the account the teller and the manager looked at that new checklist and said, hey, we need a new updated certificate of trust that is in compliance with Michigan law.

So, it didn’t void out the certificate of trust that was prepared years ago on behalf of the client. They simply refuse to do what the client asked them to do relative to the bank account without an updated certificate of trust. That is why you might well need a new certificate of trust. It’s not because your old one is no good anymore. It’s because of the financial institutions and what they are now doing relative to this change in Michigan law.

Order your new Certificate of Trust today at our Legal Store.

The foregoing is an excerpt from the June 25, 2019 Tuesday with Tom episode “Why You Might Need a New Certificate of Trust”

Episode Video

Episode Podcast

Contrary to what you might hear at a free, no obligation dinner discussing investments, not everyone needs a Living Trust. Listen while Tom discusses 6 occasions when you should consider a Living Trust as part of your estate plan.

Over the 6 episodes beginning January 23 I am discussing how to avoid the six most common estate planning mistakes. In today’s episode, I talk about the importance of using a Durable Power of Attorney and a Health Care Power of Attorney to plan for incapacity.

Episode Video

Episode Podcast

Over the 6 episodes beginning January 23 Tom discusses how to avoid the six most common estate planning mistakes. In this episode Tom talks about how failing to fund your living trust can cause your estate to have to go through probate.

Episode Video

Episode Podcast

Over the 6 episodes beginning January 23 Tom discusses how to avoid the six most common estate planning mistakes. In this episode Tom discusses why a Will does not avoid probate.

If you haven’t heard, new legislation took effect in June last year regarding funeral arrangements. Any legally competent individual may appoint a funeral representative to make decisions about what happens to that individual’s remains after he or she dies.  The funeral representative has the authority to make decisions about funeral arrangements as well as the handling and disposition of the decedent’s body. This means that the funeral representative has the power to make decisions regarding things like cremation and the decedent’s ultimate resting place.

The legislation may be particularly helpful for longtime life partners or unmarried couples, blended families, individuals with long-distance families, or any individuals who wish to bypass the order of priority provided by Michigan law.

Absent a properly appointed funeral representative, Michigan law controls who has the authority to make these types of decisions after a person’s death. The law vests that authority with the next of kin (usually spouses, children, or other immediate relatives). Sometimes that isn’t a problem. Maybe that means a spouse or a child would have the authority to make those decisions for you, and that’s the order you would prefer.  Other times the order created by the law causes a problem. For example, an elderly widow passes away. At the time of her death she had been estranged from her only child for some time. Years ago, the woman met with a local funeral home and preplanned all of her funeral arrangements based on her specific wishes. When she passed away her estranged child, being her next of kin, ultimately had authority over all of the funeral decisions. That included the power to change arrangements previously put in place by the woman.  And, unfortunately, the child did just that. Here, it would’ve been very helpful for the woman to appoint someone other than her child. It could’ve been a trusted friend or a different family member that the woman knew would do everything possible to follow the woman’s wishes.

It’s important to recognize that the new law lets you designate who will make decisions about your remains. A gap in the law still remains in that your funeral representative isn’t required to follow your wishes.  So if you have certain funeral and burial wishes it’s imperative to nominate an individual whom you trust will carry out your wishes.

A nominated funeral representative isn’t obligated to accept their appointment. A prudent planner might nominate several individuals in a row in case a nominee is unwilling or unable to serve. Before being allowed to act, a funeral representative must sign an acknowledgment of their duties. One of the responsibilities is to ensure payment for funeral and burial costs or otherwise be liable for such costs. When designating a funeral representative, it may also be important for you to consider how your final expenses will be paid.

Lastly, the law identifies people who are not able to serve as a funeral representative. That list includes: a licensed health professional, an employee or volunteer of a health or veteran’s facility that provided care during a person’s final illness, and an officer or employee of a funeral establishment, cemetery or crematory that will ultimately provide final services. If, however, one of the above-named individuals is also your spouse or close relative an exception is made.

Properly designating a funeral representative may be an important piece of your estate plan that you currently don’t have. If you have questions or believe it is right for you, please do not hesitate to contact our office.

Episode Video

Episode Podcast

Tom explains why if there is a conflict between a beneficiary designation on your bank account (naming one child) and what you say in your Will (divide your estate between all 5 children), the beneficiary designation wins, and your bank account goes to the one child, not to all 5. This also applies to other assets such as life insurance, annuities, retirement accounts and jointly owned real estate.