Incapacity Flashcards
How can a living trust protect a grantor/trustee in the event of incapacity?
The LT document can contain language naming a successor trustee who is empowered in the event of incapacity. Language spells out how incapacity is determined (typically one or two MDs must sign letters).
Successor trust can control all accounts owned by the trust, but only for the benefit of the beneficiary (fiduciary duty applies). The successor trustee will first have to obtain the necessary MD letters, and contact the institutions holding custody of the trust account.
If the original trustee recovers, then they can be reinstated as sole trustee, and the successor trustee is removed.
The successor trustee can use to DPOAs control access to any accounts not held in the trust.
For a grantor with a living trust and a successor trustee provision, what role would DPOA’s play in protecting the grantor in the event of incapacity?
The successor trustee will only be able to control assets held in the trust. For assists outside the trust, valid DPOA’s are needed.
Unfortunately, financial institutions are often reluctant to honor DPOAs without a valid court order. This yet another reason to title all assets in the name of the trust.
