If you’re like many clients, much of the time spent on your estate plan probably focuses on how your assets will be distributed and who those assets will ultimately go to. Another decision, however, that requires careful consideration is who should serve as your “fiduciary.” A fiduciary is defined generally as a person (or entity) to whom property or power is entrusted for the benefit of another. A “fiduciary relationship” is one in which a person places special trust, confidence, and reliance in another. In the context of estate planning, a fiduciary includes individuals you choose to act as your trustee, personal representative (or executor) and attorney-in-fact, as named in a financial power of attorney. These are critically important roles in making sure your assets are protected, your intentions are honored, and your estate plan is carried out according to your wishes. So, here are five things to consider in selecting a fiduciary.
Have a clear understanding of the duties and responsibilities this person will have. Your attorney should be able to provide this information to you for each of the fiduciary roles you will need to fill.
Take into consideration the size and complexity of your estate, including whether it contains unique assets (like business or real estate interests), and whether the person you want to name as your fiduciary has any personal or professional interests in those assets, or whether he or she has specialized skills applicable to their management.
Make sure the person is honest, acts with integrity and will be able to make decisions in a fair and impartial manner and communicate, as needed, those decisions to beneficiaries and other interested parties. The person named should also be capable of understanding his or her responsibilities and be someone who has demonstrated the ability to use good judgment.
The person you select should have good financial skills, but more importantly, he or she should be someone you could describe as organized and has good attention to detail. Formal accounting and tax work can be delegated or done by advisors the fiduciary may hire, but keeping good records will be the responsibility of the person you choose.
Two final questions to ask: Should you name more than one person? That can be beneficial in some circumstances (such as where the role may be too burdensome for just one person, or where a “checks and balances” system is warranted). It may be problematic in others (such as where the individuals named might not work well together, or geographic proximity may pose practical problems). Should you name a corporate fiduciary, such as a bank or trust company? There are pros and cons, and your attorney should be able to articulate them and answer any questions you have.
These are significant decisions, and the last thing you want is to craft a well-thought-out estate plan, only to have problems in its administration because the wrong individuals were placed in critically important fiduciary roles.