California Estate Planning

Trustees vs. Financial Agents

Hi. I’m Atty. Robert Vaksman with Vaksman Khalfin. Today, we’re going to talk about the difference between Trustees vs. Financial Agents.

In terms of estate planning, we probably get this question more often than most, understandably so, because you’re really thinking about who should handle your financial affairs, who should handle your financial assets when you are incapacitated or after you pass away. In most cases, you have one or two names, let’s call him or her Uncle Dave or Aunt Mary. Either one of those people would do a great job. You may want to put Aunt Mary in first position, and you may want to put Uncle Dave in second position. You’re trying to understand what are the different roles for them if they’re acting as a trustee or as a financial agent. Let’s try to demystify what exactly that means.

Simply put, a trustee is going to manage assets that are in a trust, be it a living trust, a revocable living trust, or an irrevocable trust. Remember, trustees act and manage assets that are in a trust on behalf of a beneficiary or on behalf of several beneficiaries. Financial agents, on the other hand, are acting on behalf of a principal for different matters, be it for real estate or cash accounts or all kinds of financial, or otherwise, affairs. You still could be wondering, “Okay, but I still don’t get the difference.” I’m still talking about Aunt Mary and Uncle Dave. In practicality, you’re right. It’s the same person, but they would really be handling different responsibilities, and there is an important legal distinction. That legal distinction is: are the assets in the trust or are they outside of the trust?

If the assets are inside of a trust, and you become incapacitated or pass away, then if you’ve named Aunt Mary and then Uncle Dave to handle your affairs, to manage the assets that are in the trust, they’re going to wear their trustee hat, and they’re going to be responsible to handle those tasks. If we’re talking about assets that are not in your trust, whether you forgot to put them in your trust or for whatever reason, they are not in your trust. Let’s take a Schwab account, let’s take a piece of real estate, and you also name Aunt Mary and then Uncle Dave to handle those affairs. Well, they will be acting on your behalf.

If you’re the principal, they’ll be acting on your behalf, but, again, it’s for those assets that are not in the trust. They’re wearing a different hat, more practically speaking. They’re using different documents to handle those affairs. If they need to communicate with a bank, with a state agency, if they are an agent, they will need to submit the power of attorney document that they have. If they’re a trustee, they would need to send in some sort of a certificate of trust or a trustee’s affidavit to prove that they’re acting as a trustee. It could be the same person, they could be acting on behalf of the same person, in this situation, you. However, they would be using different documents and wearing different hats.

Hopefully, that was helpful to understand the difference between trustees vs. financial agents. Having said that, we always welcome your questions and if you have any, please feel free to give us a call.

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