Who Should I Appoint As My Fiduciary?
As part of a comprehensive estate plan, each one of us should appoint fiduciaries to act on our behalf in the event that we are no longer able to do so during life or at our death. Simply appointing a spouse, child, sibling, or good friend may not be the right choice in all situations. What many people do not understand is that the amount of time and effort involved with serving as personal representative of an estate, trustee of a trust, agent under health and financial powers of attorney, and as guardian and/or conservator of an incapacitated individual can be very significant and even overwhelming, particularly when the fiduciary lives out-of-state, has a full-time job, and/or has a family to take care of. Oftentimes, a designated family member or friend accepts the fiduciary appointment out of a sense of commitment and obligation, only to discover that the time required and work involved is much more than anticipated.
Give careful consideration to the following questions:
- Who should I appoint as the guardian and conservator of my minor or disabled children in the event of my death or incapacity?
- Who should I appoint as the personal representative of my estate when I die?
- Who should I appoint to make health care decisions for me in the event that I am no longer able to do so?
- Who should I appoint to manage my financial affairs in the event that I am no longer able to do so?
- Who should I appoint as the trustee of my trust to manage my assets after my incapacity or death?
The individuals or entities appointed by you will have tremendous responsibilities and duties to properly serve in these capacities. Many people make their fiduciary appointments without careful consideration.
Rather than simply appointing your spouse, your oldest child, or your best friend, consider the following questions:
- Does this person have the skill and expertise to manage my financial affairs?
- Does this person have the time to manage my personal and/or financial affairs?
- Will this person be able to make difficult decisions when it comes to my beneficiaries making demands for distributions? In other words, will this person be able to say “no.”
- Will this person be put into a difficult position when it comes to family dynamics?
- When it comes to the appointment of a guardian and conservator for children, will this person raise my children with the same values that I would?
- When it comes to a health care agent, does this person know me well enough to make the same decisions which I would have made if able to do so?
- Is the person I’m appointing as old or older than I am? Is he/she likely to be alive or have the energy to manage my affairs?
- Should I consider the appointment of a corporate/professional fiduciary (such as a bank, trust company, or law firm) to manage my financial affairs in the event of my incapacity or at my death?
After considering these questions, it may very well be apparent that one person may not necessarily be the right choice for all roles. In other words, it may be appropriate to appoint one person to serve as your health care agent and another person or entity to serve as your financial fiduciaries. It is also important to consider that in the event of your incapacity, and then upon your death, the emotions and dynamics within any family can, and oftentimes do, become strained. Serving as a fiduciary carries with it many responsibilities. Generally speaking, a fiduciary is placed into a difficult position by having to manage assets and make decisions which may not be approved or appreciated by all concerned. Although professional fiduciaries charge a fee for their services, they should have the expertise to handle the most difficult of situations and do not have an emotional connection with the family. In other words, beneficiaries expressing frustration, or even anger, toward a professional fiduciary will typically be preferred over the frustration or anger being directed at another family member.