As our loved ones age, it’s important that they have a thoughtful plan in place for both care and finances, before they develop dementia or otherwise become incapacitated.
In California, complete estate plans include an Advanced Health Care Directive (AHCD) and durable power of attorney (POA). While immediate health care decisions are typically delegated to the individual named in an AHCD, the individual named in the POA is responsible for handling financial affairs, and must at least be involved in—and in agreement with—the associated financial costs of care.
As such, it may seem convenient to have the same individual manage both financial and health care affairs, however, it’s important to consider the potential conflicts of interest that could arise. Acting as an agent under an ACHD or POA comes with fiduciary duty, which means putting the best interests of the person being represented first. If you are a beneficiary of your loved one’s trust or estate, there is a built-in conflict of interest if you are tasked with making health care or personal decisions, such as hiring caregivers or picking an assisted living facility for a loved one—these are choices that could diminish your beneficial interest. While your decisions may not be malicious in nature, it can be easy to choose a course of action that affords you more resources, or is simply just more convenient. Being able to serve a loved one’s best interest can also be interrupted by existing personal and family commitments, being a busy professional in a distant city, or just having interpersonal problems with others involved in their estate plan. In some cases, even the perception of having to make decisions can strain relationships.
One potential solution to avoid challenges and conflicts is to separate the roles of health care agent and financial agent. Oftentimes, it makes sense to delegate the role of POA for financial affairs to a professional fiduciary who can handle “the business side” of things, while keeping a family member or friend—who has a personal relationship to the person being represented—in the role of health care agent. Professional fiduciaries are licensed and regulated by the state of California, and must follow a strict code of ethics and understand the law when it comes to their duties and responsibilities serving under those documents. Furthermore, naming an agent who has the skills, availability, and objectivity to support your loved ones when the unexpected strikes or the inevitable arrives, a professional fiduciary can reduce the burden of caring for your loved ones, while also preventing the breakdown of relationships and mitigating legal risks.
Too frequently, family members turn into unpaid caregivers and financial managers seemingly overnight, and they are unprepared for the challenges it can bring. Establishing and maintaining a well-thought-out plan enables all named agents to effectively serve their loved ones and achieve the ultimate goal of the plan.
Contact Santa Barbara Fiduciary
Santa Barbara Fiduciary can help you and your family navigate successor fiduciary appointment decisions, and ensure the diligent implementation of your or your loved one’s estate plan. Contact us today to learn more about our services, and how we can help you and your loved ones navigate life transitions.
