Selecting People for Roles in Your Estate Plan
A very important aspect of estate planning involves selecting people for various roles within the plan. These roles include executors, trustees, guardians, conservators, and agents for durable powers of attorney and for health care. The people in these roles are referred to as fiduciaries.
A fiduciary is a person or institution managing money, property, or care on another's behalf. The nature of this relationship gives rise to duties of good faith, trust, confidence, loyalty, impartiality, skill and care to the person or people that are the beneficiary of the fiduciary arrangement. The fiduciary is liable for breach of such duties.
Different people will have different sets of skills and strengths, resulting in different people being a better fit for different roles. While you may have a different person named for each role in the estate plan, there are often advantages to limiting the number of people named, and asking that they have multiple roles. For example, the person named as your health care agent may need to pay for some of the heath care services, making it convenient that they also be the agent for financial matters. An executor will be responsible for the probate estate, while a trustee will be responsible for the trust estate, but there may be advantages to one person managing all of the estate. It may be conceivable that only one person (plus alternates) be named for all the roles, however this should not be considered a goal. In the examples above, perhaps there is a very caring person that you wish to help you with your health care decision, but someone else would be much better at managing the finances. Ultimately, what is most important is that you feel confident that each person named will be able to do a good job in their prospective role.
Alternate Fiduciaries
In selecting fiduciaries, it is important to select alternates in addition to your primary choices. Alternates may be called upon because the first fiduciary selected is unable or unwilling to accept the appointment, may be unavailable for some reason, or may be deceased. Prior to naming people in the estate plan documents, it is important to discuss the appointment with the prospective fiduciaries to ensure that they are willing to accept the role. However, even if they are willing when named in the document, circumstances may change impacting their willingness to accept the appointment at the time they are called upon to serve. In such cases an alternate may be needed. While at least one alternate should be selected, it is usually desirable to name a couple of alternates.
Successor Fiduciaries
In addition to naming alternate fiduciaries, you will want to identify the order in which people step into the given role should that role become vacant.
Another consideration may be to provide a mechanism within the plan itself allowing the initial fiduciary, or some other person, to select successor fiduciaries should the need arise. With such a provision in the plan, it will be possible for a fiduciary that needs to resign to name a successor, even if the alternates named in the documents are not available.
Co-Fiduciaries
People sometimes wish to select two or more co-fiduciaries to act at the same time, often in an effort to combine the various skills and knowledge of the selected fiduciaries. However, it should also be considered that the use of co-fiduciaries may result in administrative complications in performing such routine tasks as signing checks or making bank deposits. If there are disagreements among the co-fiduciaries, it may be difficult, time consuming, and expensive to resolve them. Usually naming one person to serve at a time is considered the better practice.
Professional Fiduciaries
If you find it difficult to identify people to nominate as fiduciaries, an additional option may be the use of a professional fiduciary. Private and corporate professional fiduciaries are available. Private professional fiduciaries are individuals whose careers are based on serving as a fiduciary in a variety of circumstances. Corporate fiduciaries include some banks and trust companies that have a trust department acting as professional fiduciaries. Both forms of professional fiduciaries have various advantages and disadvantages. Even so, selection of a professional fiduciary as a final default alternate may be an idea worth consideration just in case they are ever needed.
