One of the most consequential decisions you will make when you are considering a will, trust or a power of attorney is who will be your fiduciary. A fiduciary may be an executor, who administers a will; a trustee, who administers a trust; or an agent on a power of attorney. They all have the uppermost duty to act in your best interest. If a fiduciary violates his or her duty, you can sue the fiduciary and/or bring criminal charges. However, such a remedy could be of little use if the individual no longer has the money or property in his possession. Your fiduciary will have access to a substantial part – if not all of – your assets. Thus, it is important that you pick the right person.
A fiduciary is required to put your interests ahead of her own. The fiduciary must act in accordance with your instructions (which may be contained in the document itself); avoid conflicts of interest with you; keep your property separate and distinct; keep good records of all transactions having to do with the fiduciary’s responsibilities; and disclose his role as agent whenever he acts on your behalf. Your fiduciary may not use your assets for his own benefit unless you have given him that authority.
Acting as a fiduciary is a hard job. For instance, an executor or trustee must make sure that the assets are invested properly; keep good records of everything that came into and went out of the estate or trust; carry out the terms of the will or trust; take into account the needs and desires of all the beneficiaries; act fairly with respect to all of the beneficiaries; and render an accounting to the beneficiaries so that they can see that the fiduciary performed her duties properly. The fiduciary must have the integrity, competence, judgment, knowledge and skills necessary to perform the job. Picking someone as executor, trustee or agent on a power of attorney because they happen to be your oldest child or because you do not want to leave them out may not be the best strategy. You may wish to ask the following questions when picking a fiduciary:
- Have you discussed your desire to appoint the individual as your fiduciary? You should absolutely discuss your desire to appoint any individual as your fiduciary before you appoint them. They may not be able or willing to take on the huge responsibilities of being a fiduciary. You do not want to appoint someone who will be unable or unwilling to serve as your executor, trustee or agent.
- Does the individual have impeccable honesty? If you have any doubts whether you can trust your prospective fiduciary, you should strongly consider choosing someone else.
- Does the individual have the time and ability to act as your fiduciary? People have a lot of commitments in their lives: commitments to their families, careers, etc. In addition, the individual being considered may not be in good health. Is the person able and willing to take on the additional responsibility of being your fiduciary?
- Even if the individual you choose is able and willing to act as your fiduciary when you sign your will, trust and power of attorney; she may not be able to perform the job later due to changed circumstances. Thus, you should always have a back-up fiduciary.
- Does the person get along with the beneficiaries? Sibling rivalries or a trustee who is unable to diplomatically deal with others can cause unnecessary strife or even cause disputes that end up in court. One of the purposes of setting up your will, trust and power of attorney is to ensure that things go smoothly without court intervention. Do not upend this goal with the wrong executor, trustee or agent.
- Is a person fair-minded? This is particularly important if the fiduciary is also a beneficiary of your estate. If the individual will put his interests ahead of the other beneficiaries, you should pick someone else as your executor or trustee.
- Does the person have the skills to manage the assets or is the person capable of receiving instruction that will allow her to properly manage the assets? Not everyone is capable of being a fiduciary. If the person is not sophisticated in handling financial matters, he is not a good choice. If the individual cannot handle her own finances, she is not a good candidate for executor, trustee or agent of a power of attorney.
- Will the person be there when you need them? Your parents are wonderful and you trust them implicitly. However, if your parents will be in their 80s when your children reach majority, they may not be the best choice as your executors and trustees.
- Should you choose a professional trustee? A professional trustee will charge fees but sometimes a professional trustee is the best choice. They can provide expertise that individuals may not be able to provide. An institutional trustee will not get sick or pass away. The professional trustee does not have a conflict of interest with other beneficiaries of your will or trust.
Some traits to look for in a fiduciary: the person should be honest, organized, tactful, even-tempered, fair, responsible and financially astute. Choose your fiduciary wisely because you and the beneficiaries of your estate will depend on her willingness and ability to do the job properly.
