The designation of individuals to act upon a person’s behalf on financial and medical issues if they become incapacitated is essential for estate planning in Michigan. Selecting the wrong surrogate, however, can undermine financial security.
Potential surrogates include the agent who acts on a person’s behalf under a power of attorney. A trustee makes final decisions on investment management, distributions, taxes and other issues involving a trust. A person may select a designee to receive the assets of joint or transfer on death accounts.
The Social Security Administration may appoint a person, normally a friend or family member, to act as a beneficiary to manage benefits of a person who lacks the capacity to do this. Insureds can designate a person to receive notice of unpaid long-term insurance premiums and manage benefits.
Having different surrogates, however, can lead to conflicts and miscommunication. Estate planners should help assure communication and cooperation. Surrogates should know their duties well before they must act. They must be comfortable with their assignment, live within a reasonable distance and know how to handle their duties. For example, financial surrogates should know about a person’s finances and have access to important documents. An agent in a health care power of attorney must know about health care directives and a person’s wishes regarding treatment under certain circumstances.
Most importantly, surrogates need to have the knowledge and ability to perform their duties. Medical decisions require an agent who can evaluate medical information and deal with health professionals. Surrogates cannot have conflicts with any beneficiary.
Family members have the advantage of knowing the person but may be too personally involved or unqualified to make decisions. Appointment of professionals brings experience and knowledge, but they may be unaware and disinterested in family relationships, adapt slowly to changing circumstances and charge fees for their services.
Appointment of joint co-trustees or agents may be a solution. For example, an institution, such as a bank, may be appointed as a co-trustee with family members who can make decisions on distributions.
An attorney can help prepare options on estate administration and long-term planning. They may help assure that proper documents are prepared and that a person’s wishes are carried out.