Living Trust v. Financial DPA
Roles of the Fiduciaries

If you are reading this, there is a good chance you already have a Trust. As I’m sure you’re aware, when you executed your Trust, you designated a Successor Trustee who will manage your Trust assets once you are unable to (upon your incompetency or upon your death).

If my office created your Trust, it is also likely that you created a Financial Durable Power of Attorney (DPA) when you established your Trust. In this document, you also named someone to take care of your finances should you become incompetent. “But wait, isn’t that why I named a Successor Trustee?” you ask. “Doesn’t my Successor Trustee have authority over my finances upon my incompetency?”

What is the difference between these two documents?

The role of the Successor Trustee and the role of the Agent in a Durable Power of Attorney vary significantly. A Successor Trustee only has authority over Trust assets once an initial Trustee becomes incompetent or upon the initial Trustee’s death. Thus, the Successor Trustee only has authority over accounts that have been properly placed in Trust. On the other hand, the Successor Trustee cannot manage Retirement Plans, because these are non-Trust assets. In order to begin acting as Successor Trustee, the Successor Trustee must execute a Certification and Affidavit of Trust, which indicates the initial Trustee’s incompetency or death. Once the initial Trustor/Trustee passes away, the Successor Trustee carries out the Trust Administration process, distributing Trust Assets to beneficiaries after paying off any debts of the Trust estate.

The Agent you named in your Financial DPA will have authority over any non-Trust assets upon your incompetency (unless you specifically granted your agent power to act immediately). This document gives your Agent the power to manage any bank accounts left out of Trust, along with any non-Trust assets like IRAs, 401(k)s, Annuities, etc. Moreover, this document is only valid while you are alive. Upon your demise, your Agent no longer has authority over these accounts. These
assets will be distributed to the named beneficiaries on beneficiary forms you submitted with the financial institution.

OK. Successor Trustee: Trust Assets. Financial DPA Agent: Non-Trust Assets. Got it.
Now that you understand the difference between these two vital roles, let’s discuss how these roles can work together to protect Trust Assets. Often, changes in state and federal law significantly impact the way a Trust should be written to best avoid estate tax repercussions, creditor claims, and many other threats to your Trust estate. While your Successor Trustee does not have the power to Amend your Trust, your Agent in your DPA can have the power to amend your Trust, if this power is properly granted by both documents.

Under California law, the Agent in the DPA may amend the Trust if, and only if, both the Financial DPA and the Trust include language that expressly grants the Agent the power to do so. It is not sufficient for the Trust to allow the Agent in the Financial DPA to amend the Trust if the DPA does not also grant this power, and vice-versa. In the event that you are incompetent and there is a major change in estate planning law, it is crucial that both documents allow your Agent to amend
the Trust to best protect your assets. It’s time to whip out your documents and check if they both grant this necessary power before it’s too late. If they don’t, we need to see you in consultation.

Please call (858) 792-0909 for this purpose.