Estate planning requires you to make numerous important decisions. While many of those decisions are financial decisions or decisions that relate directly to your estate assets, some of the most important decisions are more personal in nature. Appointing or nominating people to fiduciary positions within your estate plan is a part of the estate planning process that people often spend very little time contemplating. Unfortunately, this can be a serious mistake. Appointing the wrong person to a fiduciary position in your estate plan can have serious negative repercussions. To help ensure that you appoint the right fiduciaries in your estate plan, the estate planning attorneys at Wilcox Attorneys, PA explain the function and duties of some common fiduciaries in an estate plan.
What Is a Fiduciary?
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or assets for another person. One party, for example a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to the other one, who for example has entrusted funds to the fiduciary for safekeeping or investment. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice or protection is sought in some matter. A fiduciary has the highest legal duty of one party to another, meaning a fiduciary is ethically bound to act in the other’s best interests.
Fiduciary Positions in Your Estate Plan
One of the most common, and potentially most detrimental, mistakes people make when creating an estate plan is to underestimate the importance of the fiduciary positions within their plan. All too often, people appoint someone to a fiduciary role based solely on the fact that the individual is someone close to them, such as a spouse or family member, without stopping to consider if that individual is the best person for the position. Consider the following fiduciaries found in the average estate plan:
- Executor. When you create your Last Will and Testament, one of the decisions you must make at that time is who to appoint as the Executor of your Will. The Executor of your Will has a wide range of duties and responsibilities during the probate of your estate. How well your Executor performs those duties and responsibilities will directly impact the probate of your estate. Your Executor is responsible for managing estate assets and overseeing the entire probate process as well as reviewing and paying creditors of your estate. Eventually, the Executor will transfer the remaining estate assets to your chosen beneficiaries; however, if your Executor makes mistakes along the way, it could cost your loved ones both time and money.
- Trustee. If you include a trust agreement in your estate plan you must appoint someone to be the Trustee. The Trustee is responsible for protecting and investing the trust assets as well as administering the trust. Ideally, a Trustee should have at least a basic understanding of the applicable laws and financial concepts involved in administering a trust to ensure that the trust grows and that the beneficiaries actually benefit from the trust.
- Agent. You may also decide to include a general power of attorney or a specialized healthcare power of attorney in your plan. Once you appoint an Agent under a general power of attorney, you give that person the legal authority to act on your behalf in financial and/or legal transactions. Your Agent under a POA, for example, may have the authority to remove assets from your estate or enter into a contract in your name. That Agent has a considerable amount of power over your assets so choose wisely. An Agent appointed in an advanced directive, such as a healthcare power of attorney, typically has the authority to make critical healthcare decisions for you if you cannot make them yourself at some point.
- Guardian. In your Will, you also have the only opportunity you will have in your entire estate plan to nominate someone as Guardian for your minor children in case one is ever needed. Do not overlook this option and choose someone who you would trust with your most valuable asset of all – your child.
Contact Estate Planning Attorneys
For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions or concerns about estate planning, contact the experienced estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.