The Light Is Green. Can I Go?

"GREEN LIGHT!!!!" my three-year-old daughter yelled from the backseat.

"GREEN LIGHT!!!" her twin brother yelled in agreement.

Unfortunately, they were looking at the light for the cross street of our intersection and not the one relevant to our path forward.

Fortunately, I was paying attention and knew from past experience that trusting the twins' understanding of the local driving laws (or frankly any laws) was a fool's errand.

Our light was still red, of course. And since we were attempting to cross infamous Highway 280, it would remain red for quite some time.

But the exchange got me thinking about some other “green lights” I've encountered over the years.

For example:

"Now that I'm Executor, I can distribute everything however I want, right?"

"I'm the Trustee, so I get to decide what happens with the trust assets."

"Mom gave me power of attorney, so I can do whatever she could have done herself, right?"

In each case, someone has been given very real legal authority.

The light may, in fact, be green.

The important question is whether it's green for what they're trying to do.

Authority Isn't the Same as Unlimited Authority

Executors, trustees, and agents under powers of attorney are all given authority to act on behalf of someone else or with respect to someone else's property.

But that authority comes with boundaries.

Those boundaries may be established by a Will, trust agreement, power of attorney, court order, or applicable law. And in many cases, the person exercising that authority also has fiduciary duties requiring him or her to act for the benefit of someone else.

Simply having the title does not mean you can do whatever you want.

“I'm the Executor. Can't I Just Distribute Everything?”

Not necessarily.

An executor or personal representative is responsible for administering a deceased person's estate. That may ultimately include distributing assets to the beneficiaries, but distribution is generally one of many steps in the process.

Depending on the circumstances, the executor may first need to identify and secure estate assets, determine the decedent's debts and obligations, address creditor claims, handle expenses of administration, file tax returns, maintain records, and comply with applicable probate requirements.

The executor also has to follow the Will and applicable law.

Being named Executor doesn't make the estate yours.

It gives you responsibility for administering it.

That distinction matters.

“I'm the Trustee. Isn't It My Decision?”

Again, sometimes.

Trustees are often given significant discretion. A trust agreement might authorize a trustee to make decisions about investments, distributions to beneficiaries, the sale of trust property, and countless other matters.

But discretion does not necessarily mean unlimited discretion.

A trustee's authority begins with the trust agreement itself. The trustee must also consider the fiduciary duties imposed by applicable law.

That can become particularly important when a trustee is also a beneficiary, when multiple beneficiaries have competing interests, or when the trust gives the trustee broad discretion over distributions.

The fact that a trustee can make a decision does not always mean the trustee should make it.

And it certainly doesn't mean the trustee can disregard the terms of the trust agreement.

“But I Have Power of Attorney.”

A power of attorney can give an agent broad authority to handle another person’s financial affairs.

But here too, the details matter.

What authority does the document actually grant?

Does it authorize the particular transaction being considered?

Does the transaction benefit the principal, or does it benefit the agent?

Are there special requirements for gifts, beneficiary changes, transfers to trusts, or transactions involving the agent personally?

Those questions can become especially important when an agent wants to move money, change ownership of an account, make gifts, or otherwise alter the principal's estate plan.

Having someone's power of attorney is not the same thing as owning that person's property.

It means you've been entrusted with authority to act on that person's behalf.

The Document Matters

One common thread runs through each of these situations: read the document.

Before an executor, trustee, or agent takes significant action, the starting point should usually be understanding the source and scope of his or her authority.

What does the Will say?

What does the trust agreement say?

What powers does the power of attorney actually grant?

And what does applicable law require?

Sometimes the answer is straightforward.

Other times, a seemingly simple decision raises issues that aren't obvious from the title “Executor,” “Trustee,” or “Agent.”

That's often when obtaining advice before acting is considerably easier than trying to undo something afterward.

A Green Light, With Conditions

My twins weren't entirely wrong that afternoon.

There really was a green light.

It just wasn't our green light.

The same distinction can matter when someone is entrusted with legal authority.

Being named an executor, trustee, or agent under a power of attorney may give you significant authority to act. But that authority exists within the boundaries established by the governing documents and applicable law.

Before proceeding, make sure the green light you're looking at is actually yours.