A fiduciary is someone who has been granted the authority to act on behalf of another person. Estate administrators, guardians, trustees, and people who have been given a power of attorney are all examples of fiduciaries.
A proper estate plan will have fiduciaries in place to act on someone’s behalf in various circumstances. During a person’s life, a fiduciary may be needed to manage assets, make estate planning decisions, or choose healthcare options if a person becomes incapacitated. Fiduciaries are also needed to administer an estate or serve as trustees for any trust an individual may wish to create.
A robust estate plan will name multiple individuals who can serve as fiduciaries. Naming backup fiduciaries protects a person’s interests in case the primary fiduciary is unable or unwilling to serve. Absent a named fiduciary, important planning decisions may be left unmade until a court appointed guardian or administrator can be named.
When selecting a fiduciary, trustworthiness, capacity, and respect for your wishes are generally the most important factors to consider. For most people, their spouse, or an adult child, is the person that comes to mind. If a person does not have an immediate family member that can serve, then people generally turn to their extended family or friends who have expertise in financial or healthcare matters.
Because an immediate family member may not be available to serve, it is also important that planning documents detail specific instructions on how individuals want certain circumstances to be handled. An elder law attorney can discuss with clients the various circumstances that need to be considered when drafting documents that name fiduciaries.
Fiduciary responsibility for financial matters can get complex if an individual has a significant number of financial assets, real estate properties, or a trust that requires long-term stewardship. An amateur individual fiduciary could be overwhelmed or need to hire accountants, property managers, or other professionals.
In the case of larger, more complex assets or estates, an individual may want to consider using a corporate fiduciary. Corporate fiduciaries are professionals who have the experience and expertise to handle trusts, financial assets, and estate administration. Corporate fiduciaries provide the assurance of being licensed and insured. An additional advantage of a corporate fiduciary is professional neutrality in carrying out the wishes presented in an individual’s planning documents. A corporate fiduciary also provides assurances for those with long-term fiduciary needs that may go beyond the availability of potential individual fiduciaries.
There are, however, drawbacks to using a corporate beneficiary. For smaller estates, the cost of a corporate fiduciary may be prohibitive. Additionally the professionalism of corporate fiduciaries means that instead of your beneficiaries dealing with an individual, they are now dealing with a corporate bureaucracy. A corporate fiduciary will take the time to do things right, but this may result in a less friendly and time efficient experience for an estate’s beneficiaries.
To make sure your estate plan properly meets your fiduciary needs, please call Martha C. Brown & Associates and (314) 962-0186.