Selecting a Fiduciary

Preparing an estate plan is very important to protect your family in the event of an untimely disability or death. To a large extent, the documents that you prepare are only as good as the parties you choose to act on your behalf when you either become disabled or die. These people are known as fiduciaries. They may be the personal representative of your estate, trustee of your trust, your power of attorney, or your health care agent. Each of these folks has a different job to perform. A person who you trust with your money may not be the same individual who would make the best health care decisions. Most of all you want your fiduciary to be trustworthy and an individual who would step into your shoes and act on your behalf in such a way that would make you comfortable.

A person acting as your power of attorney is someone who will make a myriad of financial decisions on your behalf while you are still alive. At the time of your death, the executor or personal representative will make similar decisions while also administering your estate and making distributions to the appropriate beneficiaries and governmental bodies. The person acting as your power of attorney may serve on your behalf for many years, whereas the personal representative of your estate normally serves between six months and one year in this capacity. You will also be selecting a health care agent. In many cases, you may be choosing multiple family members to make your health care decisions. They will only be empowered to make these decisions while you are alive. Both a healthcare directive and power of attorney cease to exist at the time of your death. If in fact you select multiple agents to act on your behalf, it is always wise to consider the interpersonal dynamics between those that you have selected. This can be a vexing problem with blended families or if you have few family members or no one who is close to you. In some cases, it may be wise to select fiduciaries who can serve as a check and balance to one another. In other cases, where the fiduciaries have had a truculent ( hostile) relationship, then great care should be taken to avoid such fractious dynamics.

A trustee of the trust is a person or persons who will oversee the assets contained in the trust over what is normally a protracted period of time. The person or persons selected should have a reasonable knowledge of financial and tax management affairs as well as an understanding of your wishes and desires as it pertains to your family members. Naming successor trustees is most important. Many of these trusts may last for multiple generations. The last remaining trustee should be given the power to appoint a successor so that court action can be avoided. As an alternative, a corporate trustee who has perpetual existence can be named as one of the co-fiduciaries. It is always wise to give either the beneficiaries of the trust or the individual trustees the right to remove the corporate trustee and replace that trustee with another corporate fiduciary.

Selecting these trusted parties is an extremely important decision that will confront you when preparing a well thought out estate plan. A knowledgeable estate planner is a critical element when making these decisions.


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