This column was first published in the San Antonio Express-News and other Hearst Newspapers on April 24, 2020.
Dear Mr. Premack: I have a Durable POA for my Dad, who is still alive but has been declared incompetent. My Dad has a Revocable Trust that has my brother and me listed as Co-Trustees. While my Dad is alive does the Durable POA take precedence or is the Trust in effect because my Dad has been declared incompetent? Thank you. - VB
Your father had prepared a trust-based estate plan, including a revocable living trust and a durable power of attorney. If you dig deeper, it is very likely that his attorney also prepared for him a Will to back-up the trust, advance medical directives in case of illness, and a deed conveying his home to the trustee of the trust.
However, you say your father was later "declared incompetent". By whom? If a court following proper legal procedure found him to be incapacitated, it is highly likely that the court appointed a guardian to control his individual assets and to make his medical decisions. The court’s order would then have voided your father’s durable power of attorney and his medical power of attorney. But the court’s order would have had no effect on the trust.
On the other hand, if the declaration of incompetence is in a doctor’s letter, the letter is evidence of incapacity but is not a legal finding of incapacity. It would not void his durable power of attorney or his medical power of attorney. And if the trust agreement contains a provision, signed by your father, saying a doctor’s letter is adequate to invoke certain restrictions under the trust agreement, then it would affect the trust’s administration. You should consult with the attorney who wrote your dad's trust for a specific guidance on that point.
Go back in time for a moment to the date your father signed the trust and other legal documents. On that date, creating the trust split your father’s domain into two parts. The already existing domain was your father's individual ownership and control over his assets and his decisions. This individual domain includes handling his taxes, government benefits, personal investments, insurance policies, etc. It can be delegated by him to an Agent under a durable power of attorney or can be shifted by a court to a guardian if the court rules your father incapacitated.
The other domain was created anew by the trust. The trust domain is limited to any asset your father conveyed to the trust. The trust’s domain is controlled by the trustee (or co-trustees) named by your father in the trust agreement. The trustee cannot manage your father’s individual domain, it can only manage assets which have been conveyed into the trust.
Consequently, the durable power of attorney takes precedence over his individual domain while the trust takes precedence over the trust’s domain. They do not compete with each other, with one side winning and other losing. Rather, they are complementary and should be used in harmony to provide appropriate care and support for your father.
The only overlap between the two domains must be explicitly granted by your father in the documents. For instance, the Durable POA might state that the Agent has authority to convey assets to the trust, or to remove assets from the trust. The Trust might state that it can be amended by your father or by his Agent. If the Agent is not specifically granted a power related to the trust, the Agent likely does not have that power. The trustee controls the trust domain, and the Agent under the durable power of attorney under controls your father’s individual domain.
Paul Premack is a Certified Elder Law Attorney, handling Wills and Trusts, Probate, and Elder Law issues. He is licensed to practice law in Texas and Washington. View past legal columns or submit free questions on those legal issues via www.Premack.com.