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Understanding Trustee and Power of Attorney Responsibilities Thumbnail

Understanding Trustee and Power of Attorney Responsibilities

Estate Planning Guardians and Trustees

Shared Responsibilities

Fiduciary Duty: Both trustees and POA agents must act solely in the best interests of their beneficiaries/principals, placing these interests above their own.

Careful Documentation: Both roles require meticulous record-keeping of all financial transactions, decisions, and actions taken while serving in these positions.

Legal Compliance: Both must adhere to relevant laws and regulations, including proper tax filings and reporting requirements.

Avoiding Conflicts of Interest: Neither role permits using your position for personal gain. Both require disclosing and appropriately managing potential conflicts.

Seeking Professional Guidance: Both responsibilities often require consulting with legal, financial, and tax professionals to ensure proper management.

Trustee-Specific Responsibilities

Trust Document Adherence: You must thoroughly understand and follow the trust document's specific instructions regarding asset management and distributions.

Investment Management: Make prudent investment decisions aligned with the trust's objectives, considering appropriate risk tolerance and diversification.

Beneficiary Communication: Regularly update beneficiaries about the trust's status, investment performance, and relevant changes.

Asset Distribution: Follow the trust's guidelines for distributing assets to beneficiaries fairly and according to the trust creator's intentions.

Ongoing Review: Periodically review the trust's performance and make adjustments as needed while staying aligned with the creator's intentions.

Power of Attorney Responsibilities

Document Scope Understanding: Know precisely what authority the POA grants you, whether limited to specific transactions or broader decision-making power.

Principal-Directed Actions: Make decisions that align with what the principal would likely choose if able to decide for themselves.

Type-Specific Duties: Recognize your specific responsibilities based on the POA type:

  • General POA: Manage financial and legal matters broadly (ends if principal becomes incapacitated)
  • Limited POA: Handle only specifically authorized transactions or matters
  • Durable POA: Continue making decisions even if the principal becomes incapacitated
  • Medical POA: Make healthcare decisions when the principal cannot
  • Springing POA: Begin duties only when triggering events occur (typically incapacity)

Principal Communication: Keep the principal informed about actions taken on their behalf when possible.

Authority Limits: Understand when your authority begins and ends. Most POAs terminate upon the principal's death, unlike trusts.

Professional Support Considerations

Both roles involve significant legal and financial responsibilities. Working with qualified professionals helps ensure you fulfill your duties properly and protect those who've placed their trust in you.

Being entrusted as either a trustee or POA agent reflects the confidence someone has in your judgment and integrity. Understanding the unique responsibilities of each role helps you serve effectively and honor that trust.