Defining the Fiduciaries You Should Appoint in Your Estate Plan

By Cory Howes

While the term fiduciary is a legal term with a long history, it very generally means someone who is legally obligated to act in another person’s best interests. Trustees, executors, and agents (under a power of attorney) are all examples of fiduciaries. When you pick trustees, executors, and agents in your estate plan, you’re picking one or more people to make decisions in your and your beneficiaries’ best interests and in accordance with the instructions you leave. Luckily, understanding the basics of what each of these terms means and what to consider when making your choices can make your estate plan work far better.

Trustee

If you utilize a revocable living trust in your estate plan, you will need to appoint successor trustees to act on your behalf in the event you are incapacitated and after your death. Sometimes this will be the same person, or you may choose to have different trustees serve in the event of your incapacity and after your death. An “Incapacity Trustee” manages the assets held in your revocable living trust upon your incapacity and provides for you and your family during your incapacity. Often called an “Administrative Trustee,” the successor trustee you appoint to serve after your death manages the trust administration process and ensures your wealth is passed on and managed in accordance with your wishes.

Whether you have a will or trust-based plan, if you create trusts for your beneficiaries after your death, you will need to appoint trustees to manage the trust assets and make distributions to or for the benefit of the trust beneficiaries.

Like each of the following individuals involved in your estate planning, it’s best to have a trusted person or financial institution carry out this vitally important role. It’s important to make the language in your trusts as clear as possible so that your trustees know exactly how to handle various situations that can arise. Lastly, your trustee will only control the assets contained within the trust — not the rest of your estate, another reason that completely funding your living trust is incredibly important.

Powers of Attorney

Your powers of attorney are the documents in your estate plan that appoint individuals to make decisions on your behalf if you become unable to do so yourself. There are a few different types of powers of attorney, each with their own specific provisions. There is quite a wide range of situations covered by various powers of attorney, and we can help you decide which types you’ll need based on your current situation and future goals. Here are two common types to cover in your estate plan:

Financial Powers of Attorney

Financial powers of attorney (also called General or Durable powers of attorney) appoint an agent or attorney-in-fact to make financial decisions on your behalf, such as paying bills, managing assets, and providing for your general welfare and care. You should appoint someone you trust, and a person or institution with the time, ability and financial experience to manage your assets and make appropriate financial decisions for you and your family.

Healthcare Powers of Attorney

Healthcare powers of attorney also cover a wide range of specific actions that can be taken regarding your medical needs, such as making decisions about the types of care you receive, choosing the doctors or medical facilities for your treatment, etc. When choosing the person to make medical decisions for you, it is important that the person is someone you trust and will follow your wishes even if they do not necessarily agree with them. It should also be a person who would not be intimidated by doctors or other medical personnel, and would advocate on your behalf if necessary. The person should have the ability to understand medical terms and situations, but not necessarily someone who has experience or training in the medical field.

Personal Representative

You appoint a Personal Representative (also called an Executor or Executrix) in your will, and the personal representative is the person who will see your assets through the probate process (if necessary) and carry out your wishes based on your last will and testament. Depending on your preferences, this may be the same person or institution as your trustee.

Most people these days appoint a family member or friend as personal representative, but it’s important to consider the amount of work involved before placing this burden on your family or friends. If you do appoint a family member or friend, they will have the authority to hire an attorney or other professional assistance as necessary. Being an personal representative can be hard work and may have court-ordered deadlines, so it’s crucial to pick someone you know will be up for the job.

In the alternative, you can appoint a professional as your personal representative, such as an attorney, CPA or a professional trustee (bank, trust company, or individual professional trustee). The advantages of appointing a professional are that they have experience handling estate administration, and they do not stand to gain anything from your estate. This may be the best choice if your estate is large and will be divided among many beneficiaries.

Get in touch with us today

Let us help you make the process of picking your trustee(s), powers of attorney, and personal representative as smooth and headache-free as possible. Once you have these choices in place, you’ll be able to rest easy knowing that your estate plan is in good hands no matter what life brings. Give us a call to make an appointment today.