the Probate Judge—Agents & Trustees
Rudd, appeared December 1, 2005, 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: Does a power of attorney (POA) empower the agent to act on behalf of the
principal as a trustee in a living trust? For example, let's say Sam Jones
is the trustor, trustee and beneficiary of the Sam Jones Living Trust (Sam
is widowed, and his only child is the contingent beneficiary). Sam draws up
a power of attorney with his friend Mary Smith as the agent (attorney-in-fact).
Can Mary act on Sam's behalf as trustee of Sam's trust? What about as the
trustor? Let's say that the trust does not mention the use or existence of
any POA. M.G., Albuquerque
New Mexico's Uniform
Trust Code (UTC) calls the trustor a settlor, so I will too. A settlor must
have mental capacity to create, amend, revoke or add property to a revocable
trust. The capacity required under the UTC is the same as that required to
make a will.
If a settlor becomes incapacitated after creating a trust, a guardian, conservator
or agent under a durable power of attorney may be able to exercise some powers
relating to the trust on the settlor's behalf.
Section 46A-6-602E. of the UTC states, "A settlor's powers with respect
to revocation, amendment or distribution of trust property may be exercised
by an agent under a power of attorney only to the extent expressly authorized
by the terms of the trust or the power."
The power of attorney or trust document would have to grant specific powers
to the agent to amend or revoke the settlor's trust. Guardians and conservators
would need to obtain approval from the district court supervising the guardianship
or conservatorship before modifying an incapacitated settlor's trust.
Most trust documents include the appointment of a successor trustee to manage
the trust if the settlor becomes incapacitated or is unavailable. Settlors
should avoid signing a POA containing instructions that conflict with their
Many powers of attorney do not include powers over a trust. Settlors should
consider carefully before granting such powers to an agent. If a conflict
of interest arises or a breach of the trustee or agent's fiduciary duties,
a court battle could arise. If settlors want their trustees to have the primary
responsibility for managing the trust, rather than their agents, then settlors
should not grant broad trust powers to the agents in the POA.
Nevertheless, having a financial or general POA is wise in case the trust
document does not give complete financial powers to the trustee. For instance,
a trustee may not have the authority to file health care insurance claims
for the settlor. An agent named in a separate financial POA would be able
to do so.
A financial POA could also authorize an agent to complete the transfer of
assets into the trust if the settlor became incapacitated and had not finished
transferring the assets. But unless the POA identifies the trust and grants
the agent powers to handle specified trust matters, or a trust document specifically
grants powers to an agent, the trust is generally off limits to an agent.
People who create trusts and POAs should discuss this important issue with
their attorneys before finalizing the documents.
2005, Albuquerque Journal, All Rights Reserved