What if you are appointed as Personal Representative, Trustee or Agent?
First, we have to understand the concept of a “hot document.” A hot document is one that confers authority. A Will is never a hot document until the Testator dies. A Power of Attorney usually confers authority at the time that the document is signed. Sometimes, a Power of Attorney is drafted as a “springing power” which means that it does not confer authority unless an event occurs, most commonly the incapacity of the principal. Only if the principal becomes incapacitated is the document “hot.” But a better drafted Power of Attorney will confer authority right when it is signed by the principal. The Agent can step in as an assistant whenever needed. A Trust can confer authority either during the grantor’s lifetime, or at death, or at incapacity. A successor Trustee will only have authority after an event has occurred, usually the incapacity or death of the first Trustee.
Once a document is “hot,” what do the different titles mean? I think it is helpful to visualize taking one of these roles as putting on a baseball cap. If you are appointed to be the Personal Representative, and the Testator has died, you need to be able to put on the hat with the letters “PR” on it. A court needs to give the Personal Representative the authority to act, because the Personal Representative will stand in the shoes of the Decedent for all the world. The job includes making sure that all assets held by the Decedent are identified, valued and secured; that all creditors are identified and paid (including the IRS and the state); any transfer taxes are paid (such as estate taxes); and that the property is delivered to the proper beneficiaries. Once this is all done, the “PR” hat comes off when the estate is closed at the Probate Court.
An Agent may get the “A” baseball cap right after the Power of Attorney document is signed, because it is a “hot” document right away. Wear this cap all the time that the principal is alive, but you do not have to do anything unless the principal asks you to, or needs you to do something. No court is involved. An Agent can only do what the principal wants or needs. Appointing an Agent does not take any power away from the principal, but the Agent acts when the principal is either unavailable or unable to act. Most commonly, the Agent acts when the principal is unable to act, either because of illness or infirmity. Once the principal dies, the authority under the Power of Attorney is extinguished and the cap comes off permanently.
A Trustee can be appointed when a Trust is created or can be appointed as a successor Trustee after an event has occurred. There can be more than one Trustee. A Trustee wears the “T” hat and is responsible only for what is in the Trust. A Trustee does what the Trust says. When a Trust is revocable, the Trustee has a duty to the Grantor, the person who can revoke the trust. When a Trust is irrevocable, the Trustee has a duty to both the current beneficiary as well as future beneficiaries.
All of these roles are generally described as fiduciaries. That means that when wearing any of these caps, you are responsible for someone else’s property and must act in a prudent fashion, more prudently than you might when taking care of your own property.
Finally, you can wear more than one cap at a time. Imagine if you are appointed as an Agent (put on the “A” cap right now) and a Trustee (put on the “T” cap on top of the “A” cap) and then your principal dies (take off the “A” cap, leave on the “T” cap, and put on the “PR” cap.) A tower of hats!