Ask the Probate Judge—Power of Attorney and Trust Questions
Rudd, appeared June 10, 2004, Albuquerque Journal, Business Outlook
Reprinted with permission
Editor's note: This column may not be quoted or reproduced in whole or part without express written permission of the author.
Q: An existing financial power of attorney names a spouse as the attorney, but the spouse has dementia and cannot perform the duties. If the first alternate happens not to be financially responsible, but the second alternate is very financially responsible, how can the second alternate take charge of the finances? Can this be done via verbal or written agreement between the first and second alternates, or does a new financial power of attorney have to be drawn up? A.S.
The person you appoint to act on your behalf for financial and health care matters is called an "attorney-in-fact" or "agent." Legally, the first alternate agent appointed in the power of attorney has priority to serve if the primary agent is incapacitated.
If the first alternate agreed in writing not to serve, then the second alternate agent would have priority. If the first alternate was unwilling to decline to serve, then a court proceeding might be necessary to prove the first alternate agent was unfit. This could be time-consuming and expensive.
If the person who created the power of attorney still has mental capacity to make legal documents, then signing a new power of attorney naming the financially responsible agent as first choice is probably the wisest course of action. If the person who created the power of attorney lacks mental capacity, a court conservatorship proceeding could become necessary unless the first alternate agrees not to serve.
Q: Our trust was written when we lived in Arkansas and modified and updated when we lived in Florida after our children married and started families. We are now full-time residents of New Mexico. How portable are these documents? Must they be updated in any way to meet New Mexico's requirements? They were prepared by qualified law firms in Arkansas and Florida. E.H., Rio Rancho
I discussed this question last year with different states. But I'm happy to review. Trusts and wills are ambulatory, which means they can move from state to state.
If your trust was created validly in Arkansas and Florida, with the proper paperwork, signatures, witnesses (if required), and notarization, then it should work in any other state where you might live, including New Mexico.
Remember that once a trust is created, the trustor must transfer all assets into the name of the trustee of the trust. This includes land, houses, bank accounts, stock accounts, and other assets, no matter where located.
Making these transfers completely, accurately, and as promptly as possible is very important. Assets that have been transferred into the trust pass automatically to the trust's beneficiaries when the trustor dies. If legal title to all assets is held in the name of the trustee, no court probate proceeding should be necessary. As people acquire additional assets, they should also title those in the name of the trustee of the trust.
People who set up trusts should review them periodically to make sure that their choices of successor trustees and beneficiaries are still current.
© 2004, Merri Rudd & Albuquerque Journal, All Rights Reserved