YOU'RE THE CEO OF YOUR ESTATE PLAN

5 important questions to help you choose Fiduciaries who are right for the job

Developing and managing your estate plan is much like being the CEO of a company. To have your plan run smoothly, you need to make spot-on decisions when selecting the individuals to fill the requirements of the plan’s important Fiduciary roles. Fiduciaries are granted certain rights and powers to be exercised on your behalf and without your supervision if you are incapacitated, unable to handle your own affairs or deceased.

You can have all the right documents in place, leave instructions as to where your important papers are located and update your investment accounts and beneficiary designations. But, if you choose the wrong people to manage your affairs, your plan may not operate as you had envisioned.

No Honorariums. Conscientious decision-making

Like any important decision made by a CEO, choosing the right Fiduciaries requires careful forethought, consideration and evaluation. In reality, you are choosing individuals to do a job. There’s no other way to look at these selections. In some roles, Fiduciaries also get paid for their work.

Fiduciary roles are not honorary positions and need not be assigned to immediate family members.  These selections should be made thoughtfully and wisely. And, as CEO, you should choose the individual with the best qualifications, skill set and temperament for the job.

Across the board, Fiduciary roles require expertise, the right skill set, propriety and the characteristics of utmost loyalty to your wishes and values, along with responsibility and trustworthiness.

Here are five important questions to consider when you put on your CEO hat to make these designations:

1.  What are these Fiduciary positions?

POWER OF ATTORNEY/ATTORNEY-IN-FACT

Role – Assists in the management and control of your financial and life affairs in the event you become incapacitated

Duties – Assumes the right to pay your bills, sign documents and conduct financial transactions on your behalf, may also make decisions about your living situation in cases of ongoing incapacity

Skill set – Someone who’s responsible about managing money and has the good sense to know what he/she doesn’t know and seeks guidance from a professional such as your financial advisor or estate attorney; has the ability to handle challenges to his/her authority when others (including family members) challenge decisions being made on your behalf

EXECUTOR

Role – Individual charged with wrapping up your final affairs.  This individual is appointed in the Will and charged by the court to oversee the administration of your estate by collecting assets, paying final debts, and making distributions under the terms of your Will; an Executor is entitled to compensation from your estate

Duties – Finds all your important documents, takes charge of your property, pays creditor claims, files tax returns, distributes the assets of the estate to beneficiaries and files the final accounting with the court.  Unless you have appointed a Funeral Agent, your Executor also is tasked with making arrangements for your burial or cremation.

Skill set – Again, an individual who’s responsible about managing money; someone with good discretion who communicates clearly and is good at conflict resolution because sensitive relationships among heirs sometimes exist; is quick to reach out for assistance from professionals if and when needed

TRUSTEE

Role – Appointed pursuant to a Will or standalone Trust, this individual will manage and invest trust assets as well as administer the trust agreement using the terms you created; position is entitled to compensation

Duties – This can be a long-term responsibility, because Trusts are often established to handle funds for many years after you die, typically for the benefit of minor/young beneficiaries or for those who have special needs. If you have a business, he/she will manage it until it is sold or transferred to the next generation.

Skill set – A financial or legal background is helpful; also, someone who does not have any conflicts with beneficiaries

MEDICAL/HEALTHCARE PROXY

Role – This appointee makes healthcare decisions for you if you are unable to make them yourself because you are incapacitated

Duties – Communicates with medical professionals overseeing your care and makes certain the protocols they are using align with your wishes regarding methods, extent and scope of care

Skill set – Understands complicated medical terminology, protocols and outcomes; knows how you would make healthcare decisions regarding your care and is stalwart in carrying out your wishes; is able to remain calm under pressure

GUARDIAN

Role – A guardian is appointed when you have minor children (children under 18 years of age) or adult family members with special needs

Duties – A guardian of a minor is a person who has the powers and responsibilities of a parent concerning the child’s support, care, education, health, and welfare.

Skill set – An individual who will parent with your parenting style, who will make the well-being of your children a priority and who will love your children as you do.

2.  Are two individuals (co-Fiduciaries) better than one?

Appointing co-Fiduciaries to serve together is a good idea, especially if at least one of your appointees lives out of your geographic area. It also provides an opportunity to allow family members to share responsibilities, and, in some cases, check and balance each other. Make sure that the two people you choose will get along and act in concert. Don’t select two just because you want both to feel honored or to avoid an argument between the two of them.

3.  How about backups?

Always have backups. Life changes, the unexpected happens and a Trustee, for example, may serve for years which makes backups critical. Also, if you’re a parent appointing a guardian, a backup ensures that your wishes will dictate, influence and inform a decision should something happen to the first guardian as opposed to a decision made through the guardian’s choice.

4.  And what about professional Trustees?

This is a circumstantial decision. A professional Trustee is more objective, so this makes sense if there’s a pattern of family discord. But it costs money. Think carefully and make sure your situation commands this alternative.

5.  Can a Fiduciary be a Beneficiary, too?

Yes, and usually is. And this works in most circumstances, unless you anticipate conflict. In that case, choosing an objective person is preferable. Indeed, there’s much to consider when filling Fiduciary roles. Ensuring you choose the right individuals can make or break your estate plan—even more so because Fiduciary responsibilities must be carried out during a challenging and grief-filled family time.

Your estate planning attorney: always on hand to help

Your estate planning attorney will help you evaluate your options based on the nature and extent of your assets, the personal qualities of the individuals you consider and the unique nature of your family dynamics. After all, like all capable leaders, as CEO of your estate plan, you will know when it’s time to reach out.

At Phelan, Frantz, Ohlig & Weqbreit, LLC, we take our responsibility to provide families with conscientious estate planning and guidance very seriously. Please contact us if we can be of assistance to you in developing and/or reviewing the appropriate estate plan for your family, including your designation of individuals to fill these important Fiduciary roles.