Financial control is considered one of the main constructive priorities of the estate planning process, as well as for the formation of its trust. The financial control of an estate and its trust is generally performed by a licensed CPA accountant or estate law attorney under the directive of the state’s original executor or trustee. In circumstances where the owner of the estate is terminally Ill, the transfer of an estate to a designated trustee by will or by a court, for purpose administration and financial oversight, durable financial power of attorney (DFPOA) may be enforced.
The definition of financial control is that of administrative record and executor decision. The administrative record is financial accounting reporting and guidance where the general framework of fiscal responsibility is required by law. An estate trustee along with a CPA controls the financial dimension of the estate, managing trust accounts and property assets on behalf of an owner or spouse and beneficiaries until it is time to for distribution. Transfer of assets from safe deposit boxes, real property, life insurance policies, stocks, bonds, bank accounts and other assets such as social security claims are all part of the scope of financial control of an estate. Tax filing accountability for all assets, including those not protected by U.S. federal Internal Revenue Service (IRS) tax-exemption at the time beneficiaries inherit, falls under this rubric of responsibility as well.
The financial control of an estate involves a range of duties related to management of the property and administration of its trust. The preservation of assets as part of the administration of the estate, as well as sale of designated assets and income distribution from sold property later are all part of the relationship of a financial controller with an estate. U.S. federal estate law dictates that income tax filing, including gift tax related reporting be performed annually. The secure valuation and appraisal of assets connected to an estate, must be performed by a professional appraiser hired by the executor or trustee in charge of the estate.
Appraisal of the full market value of an estate’s assets must be placed on record before inheritor beneficiaries are noticed of a decedent’s death. The terms and conditions of joint tenancy assets, such as investment, pension, or other retirement accounts where spousal decision is involved may be part of the control of the estate preceding the death of the decedent, but not always. Example is a surviving spouse who is also the designated trustee of a living estate, decides to perform a funds transfer from joint tenancy account to an individual account rather than a shared estate account. In such case, financial control of the same transfer by an executor or trustee on behalf of the estate occurs only if the funds are transferred to the estate instead.
Within federal and state estate law rules, “durable financial power-of-attorney” is designated trustee representative of an “incapacitated party” in financial decisions regarding an estate or other relationship requiring financial control. The legal concept “power-of-attorney” is generally interpreted in federal and state law as the “attorney-in-fact” that acts as the agent on behalf of another. Some powers of attorney are limited in scope, as with DFPOA. In most states, DFPOA requires that a trustee be at least 18 years of age, and “of sound mind” and not found “mentally incapacitated” in court (N.Y. Surr. Ct. Proc. Act § § 103, 707.). DFPOA is relevant for both estate administration and probate of trusts. Estate planning clients requiring a legal guardian to serve on their behalf in circumstances of financial control, can use DFPOA to ensure that their wishes are met during the life of an estate, and its ongoing management or dissolution after death.
The law of “incapacitated parties” is a universal rule element of estate law in all U.S. states. Designated guardianship related to incapacitated parties, stipulates the distribution of revocable trust assets for purposes of medical care or other life-sustaining care must be performed by a named trustee on record with the court. Trustees are assigned the duty of care where the estate and its assets are concerned. An estate may initially be under the care of an owner trustee who later passes off their responsibility to a designated trustee either before or after their death.
In some states, legislation exists allowing for successor trustee withdrawal of an incapacitated estate owner’s financial control with the assistance of a designated medical physician, as condition of the estate’s living will. Terminally ill patients and other incapacitated parties have right to quality of life and provision by a guardian committed to a duty to a reasonable standard of professional care under law. This same tort law rule element applies to representation of an estate owner who is has been deemed an incapacitated party. DFPOA responsibility for the planning, execution, and probate administration of an estate ensures that an incapacitated party is afforded the same rights as they had before they were deemed incapacitated by a court.
Guardianship and estate planning are commonly a final step in a person’s life. The presence of a guardianship reflects preceding appointment of an agent, usually a family member and/or successor DFPOA agent who can act on behalf of an incapacitated party where financial dealings are concerned. A condition of DFPOA attribution of powers by an estate, is generally based on physician’s diagnosis of a principal’s incapacity. The transfer of power to a DFPOA is “durable” based on the presence of a principal’s inability to care for themselves, or the trust. The statutory powers of a DFPOA agent can also apply during a probate matter once the decedent passes, especially if continued representation is stated wishing a living will directive. Otherwise, those powers are canceled automatically and superseded by the Will.