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Court of Wills, Estates & Probate

The following articles were written by former Probate Judge Merri Rudd.

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Agents & Trustees

9:45 AM
Merri Rudd

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 trust document.

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

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