Fiduciaries In A Colorado Estate Plan
In drafting Colorado wills, we get asked to explain the difference between a personal representative, a trustee, a guardian, a conservator and an agent under a power of attorney. While all five roles are filled by fiduciaries, the responsibilities are different.
When an individual dies, a personal representative is put charge of their Colorado probate estate. Outside of Colorado, this person can go by the title of executor or administrator. In a Colorado will, we use the term, personal representative.
In a Colorado will, an individual identifies who they would like to be “their” Colorado person representative. In simple terms, this is the person charged with gathering up the probate assets after death, paying just debts and distributing what is left to the beneficiaries of the Colorado will. Typically, the Colorado personal representative is a spouse, adult child or sibling. Contrary to popular belief, a Colorado personal representative has obligations other than looking out for the best interests of the beneficiaries. A Colorado personal representative has obligations toward all interested persons. That includes creditors who file claims against the estate.
A Colorado will may name both a personal representative and a trustee. Often they are the same person, but they do not have to be. The role of the trustee is to hold property under the terms of a trust. Unlike the personal representative, the trustee’s duties are mainly to the beneficiaries of the trust. The trustee may receive property from the personal representative and from other sources like beneficiary designations on life insurance, payable on death designations on bank accounts and other trusts.
A trustee has many duties. Perhaps the most important duty is to safeguard trust assets. The written terms of the trust control the trustee’s actions and fiduciary responsibilities. The written terms of the will and Colorado probate law control the actions of a Colorado personal representative.
A guardian is the person named in a Colorado will to care for minor children. A Colorado guardian makes decisions like where a child will live and go to school. In general, a Colorado guardian makes day-to-day decisions regarding the health and well being of the child. Often, the guardian is not named as personal representative because the required skill set is different. Being a guardian involves child rearing. Being a personal representative or trustee involves managing assets, paying bills and making investments.
A conservator is the person named in a Colorado will to manage the assets of a minor child. The position is much like the role of a trustee except there is no trust with written terms. This can be confusing because other states combine the roles of guardian and conservator into one role called a guardianship or a guardian. In Colorado, the roles are distinct and separate. Both a guardian and conservator report to the Colorado probate court on a regular basis. A trustee can be required to report to the Colorado probate court, but for the most part, the trustee reports to the trust beneficiaries.
In the context of a Colorado estate plan, an agent under a power of attorney performs the role of either guardian or conservator for the individual creating the estate plan. The individual names the person they would like to see in charge of their well-being and their money should they become unable to handle their own affairs during life but before death. In the role of the guardian, there is the person with the power to make medical decisions and general decisions regarding the welfare of the individual. This is typically called a medical power of attorney. In the role of conservator, there is the person with the power to make decisions regarding property and finances. This is typically called the financial power of attorney. Unlike guardians and conservators who report to the Colorado probate court, agents may not report or account to anybody. The agent functions without oversight until such oversight is requested. While this can be a problem, it can also avoid substantial legal expenses.