Who to Designate as Your Fiduciary
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One of the most underrated decisions you have to make when creating your estate plan is choosing the person, persons, or institution to be in charge of your estate. This may include them being in charge of the distribution of your estate by will (executor), trust (trustee) or both; being a guardian for your children; being a conservator for you if you become incapacitated; or being an agent for your powers of attorney. Each of these roles is filled by a designated fiduciary who will be legally empowered to act on your behalf in different capacities. You can also have more than one person fulfill a fiduciary role by naming co-executors, co-trustees, or co-agents to ensure that all of your needs are properly met. Each role has slightly different considerations depending on the responsibility delegated. In order to make a comprehensive choice that suits your situation, it is important to consider the pros and cons of your options.
I. The Role of a Fiduciary – What Do They Do?
One thing that you should consider when choosing a fiduciary is what responsibilities they will have and which of your trusted family or friends could satisfy those responsibilities.
· Executor (or Personal Representative):
This person will be responsible for overseeing and administering your estate through the probate process. This person may be responsible for tasks such as collecting and preparing an inventory of the estate assets and property, protecting the estate assets, paying valid claims against the estate, paying bills, paying taxes, making claims on behalf of the estate against others if necessary, and distributing the estate to the beneficiaries. They may have to sell some property (i.e. liquidate assets or property) to make payments or distributions or even invest money to be able to make payments or distributions.
· Trustee
If you decide to set up a trust the trustee you name will take on the responsibility of managing the part of your estate that you put into that trust. A trust can either be designed to end and be distributed to the beneficiaries shortly after your death or to continue for years, in which case your trustee’s on-going job will be managing your trust. The duties of a trustee include several of the same duties as an executor would have and then more. The trustee will have to locate all the trust assets, collect the assets, take an inventory of the assets, possibly invest the assets, pay bills and file taxes of the estate, file accountings, communicate with the beneficiaries, and manage money for the beneficiaries. A trust that is designed to be on-going also means that the potential liability of the trustee to the beneficiaries is on-going and they can be held liable for any mismanagement of the trust.
· Medical Durable Power of Attorney Agent
The agent or agents you designate under your medical durable power of attorney will have the responsibility of making medical care decisions for you based on your wishes when you are unable to make those decisions for yourself. This power lasts during your lifetime and terminates upon your death (i.e. ‘durable’). Your agent should be assertive enough to make sure that your wishes are respected, especially while facing persistent medical professionals with a different treatment plan or morals and/or family members fighting against those wishes. It makes sense that your agent should live close to you, at the very least in the same state as you so that they can be there to make those decisions in emergency situations or for on-going illnesses.
· General Durable Power of Attorney Agent
The agent or agents you designate under your general power of attorney will have the task of managing your finances if you become incapacitated and are unable to manage your finances yourself. Like the medical POA agent, this power lasts a lifetime and terminates upon your death. You want to make sure that this person is someone that you can trust, who you like, and who understands your wishes. They should also be close in proximity so they can carry out their duties. If you name someone who is not a professional in finances, they should have some financial understanding (i.e. experience paying bills, balancing a checkbook, etc.), be responsible with money, be willing to serve, and be assertive.
II. Naming a Non-Family-Member Fiduciary
It may be the case for you that you do not have a family member that you can name for one or all of these fiduciary roles. Some of these roles may be more appropriate for family or close friends while others roles may be more properly fulfilled by a corporate fiduciary (i.e. a bank) or an independent professional fiduciary. There are companies and individuals who offer fiduciary services in the roles of powers of attorney, executor, trustee, and powers of attorney agents. In addition, they offer some of the services needed within these roles by themselves, such as day-to-day money management services, bill paying, tax document organization, asset inventory, relocation planning, care team planning, Medicare and social security consulting, and light forensic accounting services. This professional fiduciary is paid for by you or your estate to execute their assigned responsibilities, often having the necessary or expert experience to carry out the task. They can also offer these services in conjunction with you naming a family member fiduciary who will be the ultimate decision maker. For example, you can also have more than one person fulfill a fiduciary role by naming co-executors, co-trustees, or co-agents to ensure there is both an expert and trusted family member to carry out your wishes. If you do want to use a professional fiduciary you should do the necessary research and even interview potential agents to make sure that they are the right choice and offer the necessary services. The following are some factors to consider when choosing a non-family-member fiduciary for certain roles.
· Executor (Personal Representative)
The tasks of an executor, as mentioned above, may get complicated and perhaps may be too much work for your average trusted family member. It is often written into the provisions of the will that the executor is allowed to hire an expert professional to carry out the more complicated tasks and that the costs of that will be covered by the estate. You should keep in mind, however, that this option will leave less money in the estate to pay bills, taxes, and beneficiaries.
Choosing a professional fiduciary has several advantages no matter the specific circumstances. A professional fiduciary will have no potential conflicts of interest unlike a family member or spouse because they do not stand to gain from your will. People commonly name a family member or spouse to be the executor who is often also a main beneficiary under the will. Hiring a professional fiduciary will eliminate the possibility of dealing with a disgruntled family member or business partner who might accuse the executor of cheating or breaching their fiduciary duty. Naming your spouse is a popular choice but consider that they may be incapacitated for reasons such as illness, disability, or even grief. Consider such conflicts especially when the estate is larger and/or there are several beneficiaries. You want to make your passing as easy as possible on your loved ones, not an added burden.
If you want to name a professional fiduciary as your executor, remember that you will want to do some research and interview a few to find the best fit. (See the bottom of the article for a list of recommended professional fiduciaries to check out.)
· Trustee
A professional fiduciary trustee eliminates many potential problems that might arise with family members named as trustee. For example, they are great to serve as an independent trustee because they can serve for decades and will be replaced by a new agent if the original one retires. Further, they are experts and know investment options, they are regulated by law (i.e. honest and reliable), and they can handle investments, tax preparations, accounting, and other necessary management tasks. [The downside to an institution serving as your trustee is that they can be costly, they are conservative in their investments, and they can be impersonal to deal with.] If you have a family member that is capable of handling the financial matters, has the time, and there is a small chance of family conflict then they might be a good choice for trustee. The downside to appointing a family member as a trustee is their lack of expertise, the potential for conflict, and possible unavailability when it comes time to serve.
[Another alternative is to name a family trustee and require that they hire out a financial advisor, accounting professional, or lawyer to execute the more complicated tasks. Further, you could name co-trustees who each have the necessary expertise to get the job done, such as a family member who is an attorney and one who is a financial advisor.]
· Medical Durable Power of Attorney Agent
The advantages of hiring a professional fiduciary to serve are that they will remain in the same area and they will not defer to family member’s wishes, their own emotions, or medical professional’s recommendations. Another thing to keep in mind is that your medical power of attorney agent and your financial (general) power of attorney agent (discussed below) should get along if you choose not to name the same person.
While naming a health care professional is not recommended, or not allowed in some states, some professional fiduciaries offer this role as a part of their services. If they do not have that expertise, they may out-source that role to a professional who does and is trustworthy.
· General Durable Power of Attorney Agent
By hiring a professional fiduciary to fulfill the role as your agent has advantages because they will be highly experienced with not only serving as a financial (general) durable power of attorney agent, but they will also have a great deal of experience with finances. They are impartial and, therefore, more trustworthy than a family member who might be easily persuaded by other family members. In addition, they will be in close proximity to you to fulfill their tasks, they will have a duty to serve, and they will be assertive against adverse parties.
III. Conclusion
A professional fiduciary is a great option if you want to keep your family and friend’s involvement in the duties of managing your estate to a minimum. This option eliminates a lot of fighting, confusion, and mistakes, which will end up saving you and your family money as well. Just like your estate plan, you can tailor the services to fit your individual needs. It is highly recommended, and often required of the agent, that you meet with them so they can become familiar with you, your estate plan, your wishes, and your needs.
Every person’s situation is unique so you should consider all the relevant factors when deciding who will be the best fit to fulfill your wishes when you no longer can.
Professional Fiduciaries
· CS Advocare, Inc.
-Services Offered: Daily money management, care team coordination and homeware management services, Medicare and social security consulting, professional fiduciary.
-Location: Denver
-Website: https://www.csadvocare.com
· Colorado Fiduciary Services, LLC
-Services Offered: trustee services, trust protector and advisory services, personal representative, executor services, agent/POAs, conservator services.
-Location: Highlands Ranch
-Website: https://coloradofiduciary.com/about/