This column first appeared in the SA Express-News and on MySA.com on February 12, 2015.
Dear Mr. Premack: My father set up a Living Trust years ago with his attorney and financial planner. It says that he will be the Trustee until he dies or becomes disabled, and then I should be Trustee. He is now starting to lose his abilities. He is forgetful and frail. Last week he fell at home and was hospitalized with a minor fracture. How do I, as his daughter, step in to protect and assist him without the insult of telling him I think he can’t handle his own finances anymore? – T.W.
Living Trusts, when drafted properly by an experienced attorney, can provide a variety of solutions to your problem. In any Living Trust, there are three positions of authority: 1) The Grantor is the person who created the Trust, and has the legal right to modify or revoke the Trust; 2) The Trustee is the person who manages the Trust’s day to day business; and 3) The Beneficiary is the person who the whole structure is designed to support and assist.
Your father’s Trust named him to occupy all three of those roles. However, it also specified that should he die or become disabled, the role of Trustee should be passed to you. When you become Trustee, your sole task is to provide for and support the Beneficiary (your father) using the assets that he placed into the Trust. The role you seek to assume is detailed and time consuming, and as a caring daughter you are happy to take on the burden.
But you do not want to insult your father by insisting that he has become too confused or forgetful to manage his own financial affairs. How do you handle this situation?
The Trust should provide a clear definition of what it means to become disabled. When he signed the Trust, he agreed that if he matched that definition he would be treated as disabled. Solid Living Trusts should provide that a Beneficiary is considered disabled if 1) that Beneficiary realized he is becoming frail and signs a notarized statement agreeing that he is disabled; or 2) a licensed physician who provides care to the Beneficiary signs a notarized statement declaring that his patient has become too ill to manage his own financial affairs; or 3) a court rules that the Beneficiary is disabled.
Legally, you have four options. First, discuss the situation with your father in light of the agreement which he signed. He may agree to sign a declaration of disability.
But if your father is in that grey area of being capable one day yet forgetful the next, he may be insulted if you raise the issue of taking over Trust management. Hence, a second option is to discuss with him your desire to be a resource and to assist him during these difficult times.
Ask him if he would consider, as the Trust’s Grantor, issuing a modification to the Trust adding you as a Cotrustee. As a Cotrustee, you would have complete authority to manage the Trust’s financial affairs for his benefit. He would still be listed as a Cotrustee as well, so he will not be surrendering any of his own powers. Rather, he will be gaining an assistant who can lift some of the management burden while he is having difficulties.
Third, if he is too ill to participate, then meet with his doctor to seek a written declaration of disability. You want to avoid the fourth option – court – whenever possible, focusing instead on the other approaches.
Once you become Trustee or Cotrustee, your first job is to be certain all of his assets are titled into the name of the Trust. Check all of his bank accounts, investments, real estate, auto titles, etc. Hopefully, he has also named you as Agent in his Durable Power of Attorney, which gives you authority to act on his behalf to change ownership of his assets into the Trust. (If he has not signed a Durable Power of Attorney, he should do so while competent, at the same time he signs the Trust Amendment. He should also have a Will to support the Trust, and should have Advance Medical Directives).
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and business entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.