When structuring an estate plan, most people will give little thought to the selection of their various fiduciaries. Your fiduciaries are the individuals or professionals who will carry out your intent under your estate plan. These fiduciary positions include the Executor of your Will, the Trustee(s) of any trusts that may get created as part of your estate plan, the Agent (or attorney-in-fact) under your Power of Attorney (POA), the Health Care Agent under your Advance Directive for Health Care (ADHC) or other appropriate state law health care related agency document, and the guardian of any minor children after the passing of both parents. The one fiduciary position often given deep thought is the guardian for any minor children. What most do not realize is that most estate and trust disputes result from the failure to appoint the best individuals or professionals for these various important fiduciary positions.

In prior Newsletters, we discussed this topic in detail. See: Fiduciary Selection: A Critical Part of Any Well-Prepared Estate Plan and Corporate Fiduciaries for Estates & Trusts: Reliability, Prudence, Reasonableness, Protection and Peace of Mind. The goal of this Newsletter is to keep it shorter and to the point so that it can serve as a handy guide when structuring your estate plan.

I. What are the financial related fiduciary positions?

Three of the fiduciary positions all relate to administrative and financial responsibilities. These three positions include:

(i) Executors (probate the Will and carry out its terms if any assets end up passing to your probate estate);

(ii) Trustees (administer any trusts for the benefit of yourself and/or your loved ones that may currently exist or may get created in the future); and

(iii) Agents under your POA (assist you with handling any assets owned in your name and your other personal financial affairs if you end up needing assistance during your life).

II. Who should you select for these financial fiduciary positions?

Most of our clients will first consider appointing individuals for these financial fiduciary positions, and only look to professionals if they do not have enough appropriate individuals to serve. We normally agree with this position, but we add that you should only appoint perfect people for these positions.

Who are the perfect people for these positions? They need to meet the following three (3) critical criteria and not raise red flags under the fourth (4th) criteria.

(i) Honest and trustworthy beyond any doubt whatsoever. This is by far the most important criterion.

(ii) Responsible. This is the type of individual that will figure out what needs to be done and then get it done in a timely manner, utilizing whatever assistance is needed.

(iii) Would not mind taking on this responsibility if selected. Yes, handling multiple administrative tasks can be a hassle, but this person is happy to take one for the team and do whatever is needed.

(iv) Nothing about this person would tend to significantly increase the risk of a dispute or otherwise cause family disfunction. This is more of a fact specific question. Do any significant conflicts of interest exist in carrying out their duties (ex., if they act one way, they personally benefit more, but if they do it another way, they personally benefit less)? Would you be creating family disfunction if one sibling oversees another sibling’s inheritance? Does the individual have a personality that could tend to cause people to get upset, such as someone who may not be willing to easily communicate with others, or could tend to act in an inflexible manner in carrying out their fiduciary duties? Does a chance exist that the individual could treat this more as an income opportunity for themselves rather than as a job to get completed?

III. How many should be chosen for each fiduciary position?

Normally, you choose an initial fiduciary (normally your spouse if you have one), and then it is prudent to have two successors listed in order of priority to serve if the initial individual is unable or unwilling to serve. If you do not have three perfect individuals for these financial positions, you will normally name a professional.

IV. Who are professional fiduciaries?

Professional fiduciaries are typically Trust Companies, but some professional individuals do exist, such as Daily Money Managers. While not normally recommended, your CPA or attorney may be willing to serve. Trust Companies can be either full service (which also invest the assets) or Directed (which do not typically invest the assets).

Each of these professional fiduciary options has its pros and cons, but if sufficient assets exist to meet the minimum fees for a Trust Company, utilizing a Trust Company is often the superior choice. Some of our clients have concerns about Trust Companies being too expensive. However, where sufficient assets exist to meet the Trust Company’s minimum fee structure, the Trust Company will normally cost less than the statutory fees that an individual is able to receive for serving in these positions.

V. Do you have to name one fiduciary at a time, or can you choose two or three to serve together?

Our rule of thumb in this regard is as follows: one is better than two, two is better than three, three is better than four, etc. The more fiduciaries involved in making decisions, the greater the risk of issues arising and / or increasing hassle in getting tasks completed.

If you have multiple fiduciaries serving at a time, another question needs to be answered. Are the named fiduciaries required to act together (if two are listed, or by majority vote if more than two are listed), or can they act independently?

For positions other than Executor (under a Will), your listed fiduciaries who you want to serve at the same time can either be forced to work together or they can each act alone as they desire. Acting together reduces the risk of someone acting improperly but this can also increase the hassle on them to get tasks completed.

VI. Health Care Agent (HC Agent) under your Advance Directive for Health Care

Naming an HC Agent feels much more personal. We advise clients to think about who they would want to communicate with their doctors on their behalf if they were in a hospital and unable to communicate. The same discussion applies here as it did for the financial fiduciary positions above as to the number to choose and if they should only act together (jointly) or if they can act independently.

HC Agents are mostly individuals you trust beyond any doubt whatsoever, you believe they will attempt to best carry out your health care related desires (rather than their own) and who you believe are strong willed and inquisitive enough to be able to communicate with medical professionals and health insurance companies on your behalf.

For those that do not have appropriate individuals to serve as their HC agent, professionals known as Geriatric Care Managers can be an excellent choice to serve in this position.

VII. Guardians for minor children if both parents are deceased.

Your guardian is named in your Will and the guardian will be appointed by the probate (or other appropriate) court to serve as the quasi-parent of your minor child(ren) if both you and the child(ren)’s other legal parent pass prematurely. For some, this selection is simple, but for others, it is distressful because they do not have appropriate individual(s) to take care of their minor child(ren) in this circumstance. This is one position where professional options do not generally exist.

Are you limited to naming only one individual at a time to serve as guardian? You can appoint a couple (such as a husband and wife in the same household), but then the question is if you want the survivor to serve alone if one of them is unable to serve? For example, you want to appoint your sister and her husband to serve as your initial guardians. If your sister predeceases you, do you want her husband to then be the one chosen to serve as the guardian? If the answer is no, then you should only choose the person you are relying on to serve.

We hope that this Newsletter will assist you in making the best fiduciary selections under your estate plan. If you would like to discuss your estate plan and the related fiduciary selections, please contact us at admin@morgandisalvo.com or 678-720-0750.