While the term fiduciary is a legal term with a rich history, it generally means someone who is legally obligated to act in another person’s best interest. Trustees, executors, and agents are examples of fiduciaries. When your client selects people to fill these roles in their estate plan, they are picking one or more people to make decisions in the best interests of themselves and their beneficiaries and in accordance with the instructions they leave. They should also choose multiple backups for each of these roles in case their first choice is unable or unwilling to act when the time comes.
Helping your client understand the basics of what each role entails and what to consider when making these choices can help ensure that your client’s estate plan is effective. We always welcome your referral and are happy to assist your client so that they receive the utmost professional guidance as they draft or edit their estate plan.
Trustee
A revocable living trust is often the center of a well-designed estate plan because it is the best strategy for achieving most people’s goals. Your client (as the trustmaker) will usually serve as the initial trustee and continue to manage the trust’s accounts and property in the same manner that they did before the trust was created. They will appoint a successor (backup) trustee in the trust agreement to be responsible for ensuring that their wealth is managed in accordance with their wishes after their death or during their incapacity (when they can no longer manage their affairs). It is best to suggest that they have a trusted person or financial institution carry out this vitally important role.
Their successor trustee will control only the accounts and property owned by the trust. If they own accounts and property in their sole name—that is, not as the trustee of their trust—their successor trustee will not be able to manage those items upon their death or incapacity. They will have to rely on their financial power of attorney to give someone the authority to manage those accounts and property while they are incapacitated.
When your client passes away, accounts and property in their sole name without a beneficiary designation may have to go through the probate process. Probate requires their executor to step in and manage those items and ultimately distribute them to the people who have priority under state law (who may not be the people they would have chosen). This is why it is important to guide your client to appointing the right person to be their successor trustee and to fund their living trust fully.
Powers of Attorney
As you know, powers of attorney are the documents in your client’s estate plan that appoint individuals to make decisions on their behalf if they are alive but unable to do so themselves. There are a few different types of powers of attorney, each with their own specific areas of responsibility. We can help your client decide which types of powers of attorney they will need based on their current situation and future goals. Here are two types that are commonly included in an estate plan:
- Financial Powers of Attorney
Financial powers of attorney grant the fiduciary selected, the ability to take financial actions on your client’s behalf, such as purchasing life insurance or withdrawing money from their bank accounts to cover their expenses. A fiduciary who acts under the authority given in a financial power of attorney is generally called an agent. The agent is only able to manage the accounts and property that are not owned by your client’s trust. If an account or property is owned by the trust, it is the responsibility of the trustee to manage that item, as discussed above. They can name an individual as their agent or, in some circumstances, an institution can be named, like a trust company. While in most states the agent is permitted to charge a fee for acting as the agent under a financial power of attorney, therefore, you might wish to point out that they should keep in mind that trust companies generally charge higher fees and will likely not waive fees like one’s loved ones might.
- Healthcare Powers of Attorney and Related Documents
A healthcare power of attorney allows your client to name a trusted person to make or communicate their medical decisions on their behalf when they cannot do so themselves. These decisions may range from deciding what surgeon to use to whether to remove life support. Other documents can be used in conjunction with the healthcare power of attorney to cover specific actions that can be taken regarding medical needs, such as making decisions about the types of care one wishes to receive or who can access one’s medical information. Should this come up, we suggest strongly recommending that this be done.
Executor
The executor (called a personal representative in some states) is the person who will see your client’s accounts and property through probate, if necessary, and carry out their wishes based on the last will and testament if your client had one. Depending on your client’s preferences, the executor may be the same person or institution as the successor trustee.
Some individuals choose to name a professional as their executor. The professional is usually someone who does not stand to gain anything from the will and can be a good choice if your client owns a great deal of different property and accounts to be divided among many beneficiaries. In other words, the more complex the estate and distribution scheme, the more it may make sense to have a professional in charge. A professional may also make sense if your client does not have someone, they personally know, who can serve as the executor. Family or friends may serve, but it is important for your client to consider the amount of work involved before placing this burden on someone who has little time or experience administering the estate of someone after they pass away.
Being an executor can be hard work and may have court-dictated deadlines; it is crucial for your client to pick someone they know will be up to the job. They will probably need to hire an accountant to help sort out taxes and a lawyer to assist in the process. If there is a dispute, then attorneys, appraisers, mediators, or other professionals will undoubtedly need to be involved. Choosing a spouse or another loved one to serve as the executor may be convenient because they may already be familiar with what is owned and have an easier time ensuring that your client’s wishes are carried out. However, because of the time involved and the nature of some accounts and property, it is a good idea to encourage your client to be certain, whomever they select are up to the task.
Get in Touch with Us Today
Allow us to help your client make the process of picking their trustee, agents under powers of attorney, and executor as smooth and headache-free as possible. Once they have these choices in place, they will be able to rest easy knowing that their estate plan is in good hands no matter what life brings. We are happy to meet with you if you would like to get to know us better. We want you to feel perfectly comfortable knowing your client will be in good hands with us. You may also have your client call us directly at 708.448.5169 and we will start the process with a review discussion. We are confident you will be pleased you introduced us..
