Like many people, you may not have given much thought to your choice of fiduciaries within your estate plan. That may be – at least in part – because you are unfamiliar with the duties and responsibilities of the various fiduciary roles. Choosing the wrong fiduciaries can cause an otherwise well-drafted estate plan to fail. To keep you from making this common mistake, we can help you choose your fiduciaries wisely.
What Does It Mean to Be a Fiduciary?
None of the positions within your estate plan are referred to as fiduciary positions, yet several of them involve a fiduciary duty. A fiduciary duty imposes a legal or ethical relationship of trust and confidence from one person onto another person (or other people). When a position involves a fiduciary duty, the holder of that position agrees to act for and on behalf of another person. The law regards a fiduciary duty as the highest standard of care one person can owe another person. While a fiduciary may receive a reasonable fee for his/her services, a fiduciary cannot profit from the position at the expense of the person to whom the duty is owed.
Who Are the Fiduciaries in My Estate Plan?
Even a basic estate plan will involve at least one fiduciary role. As your estate plan grows, however, you will likely add additional estate planning components that expand the number of fiduciary positions within your plan. Those fiduciary roles may include:
- Personal Representative. When you create your Will, you will be required to appoint an Personal Representative who is responsible for overseeing the administration of your estate during the probate of your estate. Your Personal Representative has authority over your estate assets and the duty to distribute of those assets to your beneficiaries and heirs.
- Trustee. You may incorporate a trust (or several trusts) into your estate plan. If so, you will need to appoint a Trustee when you create the trust agreement. Your Trustee will manage and invest trust assets as well as administer the trust agreement using the terms you created. Often, this involves making discretionary distributions to trust beneficiaries, making this an extremely important fiduciary position within your estate plan.
- Guardian. For a parent, their most precious asset is their children. If you have minor children, the only official opportunity you will have to nominate someone as a Guardian for your minor children (should one ever be needed) is in your Will.
- Agent in a Power of Attorney. Creating a Power of Attorney involves appointing an Agent who will have the legal authority to act on your behalf in legal matters other than healthcare decisions. Whether you give your Agent broad or limited authority, the authority you do give to your Agent effectively allows him/her to act as you in legal or financial transactions.
- Agent in an Advance Directive. If you create a Health Care Power of Attorney, you will need to appoint an Agent to make healthcare decisions for you if you are unable to make them yourself because of your incapacity. This person may someday be making end-of-life medical decisions for you, such as whether to allow life-sustaining or life-prolonging procedures or medications.
How to Choose Your Fiduciaries Wisely
To help you choose the fiduciaries within your estate plan wisely, ask yourself the following questions when contemplating someone for one of the positions:
- Does he/she have the skills and/or experience needed to successfully fulfill the duties and responsibilities of the position?
- Will appointing this person likely cause personal or financial conflicts?
- Do you trust this person to make the decisions required by the position?
- Will this person be physically, emotionally, and geographically capable of fulfilling the role?
- Is this person willing to accept the job?
Contact Owings Mills Estate Planning Attorneys
For more information, please contact our estate planning office in Owings Mills, Maryland by calling 410-654-3850 to schedule an appointment.