WHO DO YOU TRUST?: Selecting Fiduciaries for Your Estate Plan
Thursday, 17 March 2016
by Brendan Bybee, JD MPA
One of the primary purposes of estate planning is to ensure that things are taken care of when you are not able to take care of them yourself. For a comprehensive estate plan, this applies to life as well as death. Choosing your fiduciaries, those who will represent you, is your privilege for planning ahead. But, for some, this privilege can be stressful and confusing.
What is a fiduciary?
The word “fiduciary” is derived from the Latin word for trust or confidence. We use that word to describe people in certain positions of trust who have special duties to those they serve or represent as a fiduciary. Setting up your estate plan requires you to choose trustees for your trust, executors for your will, and agents for your medical and financial powers of attorney. Each of these is a fiduciary because they are in a position of trust and owe certain duties to you and to others close to you. Deciding who to name is like considering who you’d trust with a blank check.
What does a fiduciary do?
A fiduciary represents you with respect to a variety of personal, usually financial, concerns. Subject to the scope and terms of the authorizing instrument (that is, the document you named them in) they are able to act for you in any way in which you could act for yourself. They can write and cash checks for you. Buy and sell property for you. Make medical decisions for you. Make investment decisions for you. Make gifts on your behalf and read your mail. Though you do get to determine the scope of your fiduciary’s authority, you will have to consider the tradeoffs of granting broad or limited powers.
In addition to any limitation you may place on them, fiduciaries have a legal duty to act loyally and in your sole interest. These fiduciary duties are also owed to those with whom you have a special relationship such as your family and beneficiaries.
Who may be a fiduciary?
Generally speaking, anyone over the age of eighteen can be a fiduciary. However, fiduciaries who are appointed by court order, such as your executor, may be disqualified to act if they have felony convictions or other circumstances that would make them unfit for such trusted service. Hopefully, your pool of potential candidates will give you so many comfortable options that cousin Jerry’s jail time doesn’t spoil your plans. If not, you may wish to name a professional or institutional fiduciary to administer your estate or trust.
Many attorneys and accountants offer fiduciary services and many banks have trust divisions that handle probate and trust administration. There are also private trust companies offering fiduciary services independently from whatever wealth management services you may have in place. Using a professional or institutional trustee will usually cost more but they have more experience and expertise and are free from the interpersonal conflicts a close friend or family member might have. Additionally, professional and institutional fiduciaries are subject to a higher standard of competence and financial stability meaning that they are less likely to make grave mistakes and more able to compensate you if they do.
Special Considerations
Because of the amount of trust placed in a fiduciary, making the right choice is always important. However, some circumstances make the decision even more critical. If you have a blended family or a history of conflict the right choice can mean the difference between leaving your estate to your beneficiaries or leaving it to their attorneys. In other cases competence and experience can be just as important as trustworthiness such as with special needs trusts and charitable trusts due to their complicated administrative procedures.
Whatever the circumstances, choosing your fiduciaries is a personal decision with unique factors to consider. Making these important decisions with the guidance of experienced counsel can make all the difference in providing you and your family with peace of mind.
This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.
What is a fiduciary?
The word “fiduciary” is derived from the Latin word for trust or confidence. We use that word to describe people in certain positions of trust who have special duties to those they serve or represent as a fiduciary. Setting up your estate plan requires you to choose trustees for your trust, executors for your will, and agents for your medical and financial powers of attorney. Each of these is a fiduciary because they are in a position of trust and owe certain duties to you and to others close to you. Deciding who to name is like considering who you’d trust with a blank check.
What does a fiduciary do?
A fiduciary represents you with respect to a variety of personal, usually financial, concerns. Subject to the scope and terms of the authorizing instrument (that is, the document you named them in) they are able to act for you in any way in which you could act for yourself. They can write and cash checks for you. Buy and sell property for you. Make medical decisions for you. Make investment decisions for you. Make gifts on your behalf and read your mail. Though you do get to determine the scope of your fiduciary’s authority, you will have to consider the tradeoffs of granting broad or limited powers.
In addition to any limitation you may place on them, fiduciaries have a legal duty to act loyally and in your sole interest. These fiduciary duties are also owed to those with whom you have a special relationship such as your family and beneficiaries.
Who may be a fiduciary?
Generally speaking, anyone over the age of eighteen can be a fiduciary. However, fiduciaries who are appointed by court order, such as your executor, may be disqualified to act if they have felony convictions or other circumstances that would make them unfit for such trusted service. Hopefully, your pool of potential candidates will give you so many comfortable options that cousin Jerry’s jail time doesn’t spoil your plans. If not, you may wish to name a professional or institutional fiduciary to administer your estate or trust.
Many attorneys and accountants offer fiduciary services and many banks have trust divisions that handle probate and trust administration. There are also private trust companies offering fiduciary services independently from whatever wealth management services you may have in place. Using a professional or institutional trustee will usually cost more but they have more experience and expertise and are free from the interpersonal conflicts a close friend or family member might have. Additionally, professional and institutional fiduciaries are subject to a higher standard of competence and financial stability meaning that they are less likely to make grave mistakes and more able to compensate you if they do.
Special Considerations
Because of the amount of trust placed in a fiduciary, making the right choice is always important. However, some circumstances make the decision even more critical. If you have a blended family or a history of conflict the right choice can mean the difference between leaving your estate to your beneficiaries or leaving it to their attorneys. In other cases competence and experience can be just as important as trustworthiness such as with special needs trusts and charitable trusts due to their complicated administrative procedures.
Whatever the circumstances, choosing your fiduciaries is a personal decision with unique factors to consider. Making these important decisions with the guidance of experienced counsel can make all the difference in providing you and your family with peace of mind.
This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.
