What is the Distinction Between a Power of Attorney, an Executor and a Trustee?

EXECUTOR

An executor is a person who is appointed to be the administrator of a person’s will.

Requirements:

The requirements for acting as an executor may vary by state, but generally, an executor must be at least 18 years old, a resident of the United States, and of sound mind.  Some states have rules that disqualify people with felony convictions from serving as an executor.

Appointment:

An executor can be appointed directly in the will; if no executor is named, the probate court will either accept a volunteer or appoint someone who is able and willing to serve.  

Duties:

The executor of the will must ensure that all relevant documents have been obtained, including the original will itself, any addenda or codicils to the will, and at least one certified death certificate.  After these documents have been collected, the executor must file a probate petition with the relevant court.  The petition includes the deceased’s name, last known address, date of death, and a list of beneficiaries and heirs.

Once the petition is filed with the court and the executor is approved, the court will issue Letters Testamentary, which are used to demonstrate the executor’s authority to access bank accounts, insurance accounts, real estate holdings, and other property held through various institutions.

The executor must notify all beneficiaries that they are included in the will and also notify any creditors of the deceased of the deceased’s passing and the commencement of the probate proceedings.

After the relevant parties have been notified, the executor must ensure that all debts provided for in the will and any valid claims by creditors against the will have been satisfied.  This includes any taxes that may be due.

Upon the satisfaction of the debts and claims, the executor will then have the responsibility of dispersing the remaining assets of the estate in accordance with the provisions in the will and any remaining assets not provided for in the manner determined by state law.

Upon distribution of all assets and satisfaction of all debts and claims, the executor will close out the will with the court. This can include providing the court with an accounting of distributions, documents showing the satisfaction of debts, and any other documents required by state law.

Overall, the duty of an executor is to ensure that a will is properly executed and in accordance with the deceased's wishes, while keeping records of the process and complying with the laws of the state where the will is being probated.

TRUSTEE

A trustee is a person or institution appointed to administer a trust.

Requirements:

The requirements for acting as a trustee are similar to those for being an executor, with some additional provisions.  Just like being the executor of a will, a trustee must be at least 18 years old and must be of sound mind.  

A trustee does not necessarily need to be a resident of the United States, but if they are a foreign resident, the body of law that applies to the trust may be different from that which applies if the trustee is a resident of the United States.  A trustee can also be an institution or organization, such as a bank.

Appointment:

A trustee can be appointed directly in a will or trust document.  If there is no named trustee in the relevant documents, or the appointed trustee cannot serve, the court can appoint a trustee.

Duties:

Trustees owe specific duties to the beneficiaries of a trust.  Different states impose different duties, so if you are appointed to be a trustee, make sure to research trust laws for your specific state.  The Uniform Trust Code provides default rules for trusts when no specific state law governs the trust.  The Uniform Trust Code provides the following duties to trustees:

Duty to Administer Trust:  the trustee, once they have accepted the position of trustee, and been properly appointed, must administer the trust in good faith, in accordance with the terms and purposes of the trust and the interests of the beneficiaries, and in compliance with the relevant law.

Duty of Loyalty: the trustee must administer the trust with the consideration of acting solely in the beneficiaries' best interests.  This means that the trustee must use trust assets to prioritize the beneficiaries’ welfare over the trustee’s own interests or those of any other party.

Duty of Impartiality: If a trust has multiple beneficiaries, the trustee must treat them equally with regard to how they invest, manage, and distribute the trust’s assets, while taking into account each beneficiary’s interests.

Duty of Prudence: the trustee must administer the trust as a prudent person would, by taking into account the trust’s purposes, terms, requirements, and any other conditions of the trust.  This requires the trustee to act with reasonable care and skill.

Duty to Limit Costs: the trustee must administer the trust in a way that incurs only costs that are reasonable in relation to the trust’s property and purposes and the skills of the trustee.

Duty of Delegation: the trustee may only delegate duties and powers that a prudent trustee of similar skill could properly delegate under the same circumstances.  The trustee is required to exercise reasonable care, skill, and caution in all aspects of delegating duties and powers.

Duty to Keep Records: The trustee must keep records of the process of administering the trust, as well as keep all trust property separate from the trustee’s own property

Duty to Control and Protect Trust Property: The trustee must take reasonable steps to control and protect the trust property.

Duty to Enforce and Defend Claims: the trustee must take reasonable steps to enforce any claims the trust may have against outside parties and to defend the trust against claims outside parties may have against it.

Duty to Collect Trust Property: the trustee must take reasonable steps to compel a person to deliver trust property to the trustee.

Duty to Inform and Report: the trustee must keep the qualified beneficiaries of the trust informed about the trust's administration and provide them with all material facts necessary to protect their interests.  The trustee must also, as reasonably required, respond to a beneficiary’s request for information related to the administration of the trust.

Overall, the duty of a trustee is to ensure that the trust's assets are directed in ways that support the trust's purpose and the interests of the beneficiaries.

POWER OF ATTORNEY

A power of attorney is granted when a person (the agent) who has been appointed, through the execution of a legal document, to act on behalf of another person (the principal) in certain matters.

Requirements:

The principal must be a legal adult (generally 18 years old) and must have the mental capacity to understand the document that they are executing at the time they sign it.

The agent must be a legal adult who is not incapacitated.

Appointment:

The agent is appointed as Power of Attorney when the Power of Attorney document is executed by having it signed, notarized, and witnessed (this is a requirement in most states).

  The document must include the names and addresses of both the principal and the agent, as well as any successor agents that may be necessary, the specific authority that is granted by the principal to the agent,  any limitations on the authority granted, the duration of the grant of authority, and the triggering condition for the power of attorney to take effect (this can be a date or an occurrence).

Types:

There are multiple types of Power of Attorney, each with different purposes and grants of authority.

General Power of Attorney: This power of attorney often grants the agent broad authority to act on behalf of the principal.  Unless limited in the power of attorney document, this includes financial and legal authority to act.  

A general power of attorney can include handling finances, such as signing checks and making purchases, overseeing property transactions, and making various legal decisions.  A general power of attorney ends if the principal becomes mentally incapacitated, dies, or revokes the power of attorney.

Limited Power of Attorney: This power of attorney grants the agent the authority to act on the principal’s behalf for a specific transaction, task, or duration.  The limited power of attorney is often used in real estate transactions, but it can also be used to allow the agent to handle or oversee transactions while the principal is otherwise indisposed or unavailable.  

The limited power of attorney terminates once the transaction is completed, the duration expires, or, in some cases, when the principal dies or is incapacitated. A limited power of attorney can become effective upon execution of the document, although some limited power of attorney documents may trigger upon the principal's incapacitation (see the springing power of attorney section for more information on this).

Durable Power of Attorney: This power of attorney is similar to a general power of attorney in that it can be used to grant the agent authority to perform a wide variety of actions on behalf of the principal (this authority can still be limited or specified in the power of attorney document).  

The difference between a general power of attorney and a durable power of attorney is that a durable power of attorney does not terminate upon the mental or physical incapacity of the principal.  A durable power of attorney lasts until the principal revokes it or the principal dies.

Springing Power of Attorney: This power of attorney can be either general or limited, depending on the document's language.  A springing power of attorney does not become active until the occurrence of a specific event (this event is often the incapacity of the principal).  

Once the event occurs, the agent gains the authority to act on the principal’s behalf in the manner specified by the power of attorney document.  Springing power of attorney documents can contain language that combines them with a durable power of attorney, meaning that the power of attorney is not effective until the event, but then the durable springing power of attorney lasts until revocation or the death of the principal.

Healthcare Power of Attorney: This power of attorney allows the agent to make  

healthcare decisions on behalf of the principal if the principal becomes incapacitated or is unable to make their own healthcare decisions.  This may allow the agent to make choices regarding healthcare providers, consent to or refusal of treatments, access to records, and other relevant decisions regarding the principal’s healthcare.

Duties:

The agent has the duty to act in the best interests of the principal, including effectively and responsibly managing the affairs entrusted to them under the power of attorney.  The agent must also ensure that they act only within the scope of the powers granted to them under the power of attorney and do not exceed their authority.

Overall, a power of attorney is a document that grants the principal the authority to empower an agent to act on their behalf in general or specific matters.  This document can be customized to ensure the principal’s goals are achieved and that the agent can engage in activities that would otherwise be restricted to the principal.

Note: the rules and requirements for each of these roles may vary from state to state.  This article is meant to provide general guidance and is not intended for use in any specific state.  Always check your state’s laws on the subject before making any decisions or proceeding with your matter.

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