How to manage bank trust account if Grantor becomes incapacitated?

[LivingGrantor]

My last living, elderly parent has a living trust and has set up trust accounts at several financial institutions, including a bank and investment/brokerage firms.

My parent is a resident of Florida.

The bank/brokerage accounts have the parent as Grantor and the only active Trustee. I am Successor Trustee.

I am Power of Attorney agent (attorney-in-fact) for my parent.

A few months ago, my parent had a serious stroke. He is able to communicate on simple terms, but cannot read, write, or understand complex topics such as the details of financial affairs. He is capable of signing his name to a document, although he relies on my siblings and me to explain the document to him.

After my father had a stroke, I was surprised to find that the Power of Attorney gave me, the Agent, no control over the trust accounts at the banks and investment firms, at least in the state where my father resides. I state this to give you an idea of my ignorance of trust law and regulation. In any case, it has been challenging to accomplish tasks such as withdrawing funds from my father's accounts in order to pay his bills.

Since my father is able to communicate to some extent, his doctor does not consider him to be incapacitated or incompetent at this time.

Since there is some likelihood of another serious stroke, I worry about what happens if he becomes incapacitated / incompetent for a significant period of time? Is there a mechanism for a bank to allow a Successor Trustee to manage the Grantor's accounts? If so, how does this work? Will a bank honor a physician written statement of incapacity / incompetence?

Thanks in advance for educating me on this topic.

BTW, my forum name, LivingGrantor refers to my own trust, not my father's trust.

 

[Tax Counsel]

You are not yet the trustee. Because of that, you have no power over any of the trust assets. And it may well be that the power of attorney your parent gave you is now ineffective due to his incapacity unless that power of attorney is a durable power of attorney. A power of attorney that is not a durable power of attorney becomes ineffective when the principal (your father) becomes legally incompetent. His disability would have to be significant to render him legally incompetent. Your father sounds like he may be legally incompetent, but you need to consult an elder law/estate plainnning attorney for that evaluation given the laws in the state where your father resides and, if different, the state in which the trust is settled. In any event, even a durable power of attorney doesn't let you exercise the powers of the trustee over the trustee's assets. You need to be the trustee to deal with trust assets.

Moreover, it is possible that the bank and other investment accounts were not transferred to the trust if the only purpose of the trust was as an aid to estate planning. That's because it's very easy to make beneficiary designations to those assets allowing them to immediately pass to the desiginated beneficiary. Thus any asset in the trust is handled the trustee, not an agent for the person who set up the trust (the grantor).

So you need to first sort out who actually owns his various assets, including each financial asset — your dad or the trust — and whether your power of attorney is a durable power of attorney. Then you'd start the court process of having your father declared legally competent and, if the power of attorney is not durable, having you appointed as his guardian or conservator (to handle the assets not in the trust) and make you the trustee of the trust. If the power of attorney is durable, the declaration by the court that he is incompetent will not terminate your role as his agent under the power of attorney. But again, that only helps you with assets not in the trust. The incompetency determination might also immediately trigger the trust term naming you successor trustee. You'll get clarity on exactly what needs to be done once you've consulted an attorney. A lot depends here on the exact language of the power of attorney and the trust instrument and whether your father is indeed incompetent under Florida law, assuming that Florida law governs the trust as well as the power of attorney.

The short version of all this: I think you need to meet with an elder law or estate planning attorney to help you sort out who owns each asset, whether your power of attorney is durable, and what steps you need to take to be able to control the financial accounts and any other assets that he has.

 

[zddoodah]

My last living, elderly parent has a living trust and has set up trust accounts at several financial institutions, including a bank and investment/brokerage firms.

Just to be clear, these are accounts owned by your father, as trustee of the trust. Correct? How many accounts and how many different financial institutions are we talking about? What is the reason for having these accounts at multiple institutions.

The bank/brokerage accounts have the parent as Grantor and the only active Trustee. I am Successor Trustee.

Would it be correct to assume that you become the trustee upon your father's death or inacpacity? Please quote the specific language from the trust instrument (with any names removed or edited, of course).

After my father had a stroke, I was surprised to find that the Power of Attorney gave me, the Agent, no control over the trust accounts at the banks and investment firms, at least in the state where my father resides.

There's no need for the POA do this since you're named as successor trustee in the trust instrument (unless the accounts are not held in the trust's name).

I worry about what happens if he becomes incapacitated / incompetent for a significant period of time? Is there a mechanism for a bank to allow a Successor Trustee to manage the Grantor's accounts? If so, how does this work? Will a bank honor a physician written statement of incapacity / incompetence?

You will have to speak with someone at each financial institution to find out what will be required for you to take control of the accounts. Unfortunately, you might get different answers from each institution, which is one of the downsides of the multiple institutions.

If I were you - and this is particularly true if there are beneficiaries of the trust other than you - I would consult with and retain the services of a trust attorney in the area of Florida where your father lives.

 

[Zigner]

Would it be correct to assume that you become the trustee upon your father's death or inacpacity? Please quote the specific language from the trust instrument (with any names removed or edited, of course).



There's no need for the POA do this since you're named as successor trustee in the trust instrument (unless the accounts are not held in the trust's name).

Dad's doctor has stated that he (dad) is not incapacitated.
...and I suspect the POA is over dad, not the trust. I'm not sure how that might affect things, but it's something to be considered.

 

[LivingGrantor]

You are not yet the trustee. Because of that, you have no power over any of the trust assets. And it may well be that the power of attorney your parent gave you is now ineffective due to his incapacity unless that power of attorney is a durable power of attorney. A power of attorney that is not a durable power of attorney becomes ineffective when the principal (your father) becomes legally incompetent. His disability would have to be

nt to render him legally incompetent. Your father sounds like he may be legally incompetent, but you need to consult an elder law/estate plainnning attorney for that evaluation given the laws in the state where your father resides and, if different, the state in which the trust is settled. In any event, even a durable power of attorney doesn't let you exercise the powers of the trustee over the trustee's assets. You need to be the trustee to deal with trust assets.

Moreover, it is possible that the bank and other investment accounts were not transferred to the trust if the only purpose of the trust was as an aid to estate planning. That's because it's very easy to make beneficiary designations to those assets allowing them to immediately pass to the desiginated beneficiary. Thus any asset in the trust is handled the trustee, not an agent for the person who set up the trust (the grantor).

So you need to first sort out who actually owns his various assets, including each financial asset — your dad or the trust — and whether your power of attorney is a durable power of attorney. Then you'd start the court process of having your father declared legally competent and, if the power of attorney is not durable, having you appointed as his guardian or conservator (to handle the assets not in the trust) and make you the trustee of the trust. If the power of attorney is durable, the declaration by the court that he is incompetent will not terminate your role as his agent under the power of attorney. But again, that only helps you with assets not in the trust. The incompetency determination might also immediately trigger the trust term naming you successor trustee. You'll get clarity on exactly what needs to be done once you've consulted an attorney. A lot depends here on the exact language of the power of attorney and the trust instrument and whether your father is indeed incompetent under Florida law, assuming that Florida law governs the trust as well as the power of attorney.

The short version of all this: I think you need to meet with an elder law or estate planning attorney to help you sort out who owns each asset, whether your power of attorney is durable, and what steps you need to take to be able to control the financial accounts and any other assets that he has.

Thanks for the reply.

Here are some clarifications. I apologize for not being more detailed in my original post.

The Power Of Attorney is a Durable Power of Attorney, and the POE does not specify any conditions such as incapacity or disability. In other words, the POE was in effect as of the date it was signed.

I have already been to one local bank where my father has an account. The banker there explained that Florida regulation does not allow a POE agent to have control over a trust account. I thought that the banker was being as helpful as he could be, and I don't doubt that the information that he gave me is consistent with his bank's policies.

Regarding your comment, "

One of my siblings asked our father's MD a couple of months ago (about one month after the stroke) whether our father qualifies as incapacitated / incompetent, and the MD replied that he was not medically incapacitated because he was able to speak. The MD was fully aware that our father had lost his ability to read or write and that he could only understand very simple sentences.

Regarding who owns the assets, for the non-trust assets (IRA accounts), my father controls them, but I believe that the POE will allow me to control them. For the trust accounts, my father the Grantor is the sole Trustee.

I plan to consult an attorney regarding my concerns, although first I want to build up enough questions that I can fill a 1-hour discussion and get my money's worth. That the is one of the two reasons that I am posting in this forum. The other reason for posting is that I expect to learn something from folks who understand this topic better than I do.

 

[LivingGrantor]

Just to be clear, these are accounts owned by your father, as trustee of the trust. Correct? How many accounts and how many different financial institutions are we talking about? What is the reason for having these accounts at multiple institutions.

LivingGrantor >> zddoodah, thank you very much for the reply. My father has accounts at three different institutions. I am not completely sure of the reasoning for having accounts at three institutions, and I'm not sure that I will ever know the answer.

Would it be correct to assume that you become the trustee upon your father's death or inacpacity? Please quote the specific language from the trust instrument (with any names removed or edited, of course).

LivingGrantor >> I am the executor of my father's will and administrator of his Trust Agreement (<-- here I am referring to the Trust document drawn up by my father's attorney, as opposed to the trust accounts at the financial institutions. One thing I have learned over the past few months is that a trust account can be set up at a financial institution with different Successor(s) than are specified in the Grantor's Trust Agreement). It is correct that I will become trustee on my father's death, but I am unclear as to when and how I might become trustee of my father's trust accounts at financial institutions if he becomes completely incapacitated. In that, that the reason for my original post.

There's no need for the POA do this since you're named as successor trustee in the trust instrument (unless the accounts are not held in the trust's name).



You will have to speak with someone at each financial institution to find out what will be required for you to take control of the accounts. Unfortunately, you might get different answers from each institution, which is one of the downsides of the multiple institutions.

LivingGrantor >> I have not yet tried talking with the two investment firms involved, although I had lengthy sessions with bankers at my father's bank. I have a concern that the financial institutions might refuse to discuss my father's accounts while he is still alive. But, I admit that I have not tried that yet. I am trying to first understand the law and my rights.

If I were you - and this is particularly true if there are beneficiaries of the trust other than you - I would consult with and retain the services of a trust attorney in the area of Florida where your father lives.

LivingGrantor >> As I replied to Tax Counsel (after you posted your reply to me) I plan to do that, but I have specific reasons for wanting to have this discussion on thelaw.com forum first. Thanks again for your reply.

 

[LivingGrantor]

Dad's doctor has stated that he (dad) is not incapacitated.
...and I suspect the POA is over dad, not the trust. I'm not sure how that might affect things, but it's something to be considered.

LivingGrantor >> Zigner, thank you for your reply. I believe you are correct, that the POE is over dad and not the trust. That is essentially what Dad's bank rep told me.

 

[adjusterjack]

I plan to consult an attorney regarding my concerns, although first I want to build up enough questions that I can fill a 1-hour discussion and get my money's worth.

You're not likely to walk away from that consultation with any DIY information. You'll tell the attorney pretty much what you told us here, he will tell you that he will handle the matter for you and then ask for a retainer.

By the way, "controlling" an asset is not the same as "owning" an asset.

 

[LivingGrantor]

You're not likely to walk away from that consultation with any DIY information. You'll tell the attorney pretty much what you told us here, he will tell you that he will handle the matter for you and then ask for a retainer.

By the way, "controlling" an asset is not the same as "owning" an asset.

ajusterjack, thank you for the reply.

So, you are saying that in a consulting session the attorney would refuse to answer these questions:

Is there a mechanism for a bank to allow a Successor Trustee to manage the Grantor's accounts? If so, how does this work? Will a bank honor a physician written statement of incapacity / incompetence?​

?

I have not had many experiences with attorneys, but I had a consulting session with a family law attorney about eight years ago, and she answered all of my questions during the 1-hour session. But, maybe I got lucky choosing that attorney.

 

[army judge]

I have not had many experiences with attorneys, but I had a consulting session with a family law attorney about eight years ago, and she answered all of my questions during the 1-hour session. But, maybe I got lucky choosing that attorney.

It might be time for you to seek another free, initial consultation with an attorney specializing in estate administration, estate planning.

An estate planning lawyer specializes in wills and trusts and can help you to draw up a will to pass on your assets. Among other estate planning legal services, this type of lawyer can help you set up a trust which will help take care of your loved ones future financial needs. Additionally, an estate planning attorney can offer you great insight as to how trusts, wills, estate administration works best.

 

[Zigner]

Is there a mechanism for a bank to allow a Successor Trustee to manage the Grantor's accounts? If so, how does this work? Will a bank honor a physician written statement of incapacity / incompetence?​

​

You're asking the wrong questions.

Is there a mechanism for a bank to allow a Successor Trustee to manage the Grantor's accounts? Yes, however, that is, apparently, not applicable in your situation. You would first have to become the trustee, then you can manage the accounts, generally speaking.

If so, how does this work? See first answer.

Will a bank honor a physician written statement of incapacity / incompetence? No, because such a statement doesn't make you the trustee. Your process begins by having the trustee removed based on that incapacity/incompetence and becoming trustee yourself.

 

[zddoodah]

So, you are saying that in a consulting session the attorney would refuse to answer these questions:

Is there a mechanism for a bank to allow a Successor Trustee to manage the Grantor's accounts? If so, how does this work? Will a bank honor a physician written statement of incapacity / incompetence?

No one here can speak intelligently about what an unknown attorney will or won't tell you, but I agree with "adjusterjack's" statement that "[y]ou're not likely to walk away from that consultation with any DIY information." That said, I can answer those three questions for you:

1. Yes. Or, to be more accurate, a successor trustee who has become the acting trustee (typically by death or incapacity of the prior trustee) can be given access to accounts owned by the trust.
2. It's up to the bank.
3. Probably, but it's up to the bank.

In my prior response, I asked you to quote the specific language from the trust by which a successor trustee becomes the acting trustee, but it doesn't appear that you provided that information. Nevertheless, I think it is probably unlikely that any bank will allow you to do anything with accounts owned by your father, as trustee (i.e., owned by the trust), while your father is alive and without an affidavit of incapacity from a doctor or a court order.

 

[zddoodah]

Will a bank honor a physician written statement of incapacity / incompetence? No, because such a statement doesn't make you the trustee. Your process begins by having the trustee removed based on that incapacity/incompetence and becoming trustee yourself.

What do you mean by "having the trustee removed"?

Unless it's a court-supervised trust (uncommon and likely not the case here), and assuming the trust instrument was drafted by a non-idiot attorney (and also assuming standard trustee succession language), the removal happens automatically upon the death or incapacity of the current trustee (in this case, the OP's father).

Let's say John Smith creates and is the initial trustee of The John Smith Revocable Trust. The trust instrument designates Robert Smith as successor trustee and has standard succession language (i.e., that the successor becomes acting trustee upon John's death or incapacity). John opens an account in his name, "as trustee of" the trust. For Robert to gain access to that account, the bank is going to require a copy of the trust instrument and a death certificate or affidavit of incapacity from a doctor who is treating John.

 

[Zigner]

What do you mean by "having the trustee removed"?

Unless it's a court-supervised trust (uncommon and likely not the case here), and assuming the trust instrument was drafted by a non-idiot attorney (and also assuming standard trustee succession language), the removal happens automatically upon the death or incapacity of the current trustee (in this case, the OP's father).

Let's say John Smith creates and is the initial trustee of The John Smith Revocable Trust. The trust instrument designates Robert Smith as successor trustee and has standard succession language (i.e., that the successor becomes acting trustee upon John's death or incapacity). John opens an account in his name, "as trustee of" the trust. For Robert to gain access to that account, the bank is going to require a copy of the trust instrument and a death certificate or affidavit of incapacity from a doctor who is treating John.

Fair enough.