A frequently overlooked (yet crucial) aspect of estate planning is the importance of choosing the right people for the fiduciary roles within your plan. The choices you make when appointing people to fiduciary roles can contribute to the success, or failure, or your estate plan. To help prevent you from making the wrong choices, the Los Angeles estate planning attorneys at Schomer Law Group, APC explain fiduciary roles and offer some suggestions on how to pick them in your estate plan.
What Is a Fiduciary?
A fiduciary is a person who holds a legal or ethical relationship of trust with another person or a group of people. Put another way, a fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. Furthermore, a fiduciary duty is the highest standard of care in equity or law. A fiduciary is expected to be extremely loyal to the person to whom he/she owes the duty and must not profit from the position as a fiduciary. A fiduciary can receive a fee for services; however, he/she should not profit at the expense of the other party.
Fiduciary Roles in Your Estate Plan
Although every estate plan is unique, your estate plan will likely require you to appoint more than one person a fiduciary position, such as:
- Executor. When you create your Will, you will be required to appoint an Executor who is responsible for overseeing the administration of your estate during the probate process.
- Trustee. If you incorporate a trust agreement into your estate plan, you will need to appoint a Trustee. Your Trustee will manage and invest trust assets as well as administer the trust agreement using the terms you created.
- Guardian. The only official opportunity you will have to nominate someone as a Guardian for your minor children if one is ever needed is found in your Will.
- Agent in a Power of Attorney. When you create a POA you must appoint an Agent who will have the legal authority to act on your behalf in legal matters other than healthcare decisions.
- Agent in an Advance Directive. If you create a health care power of attorney, you will need to appoint an Agent to make healthcare decisions for you if you are unable to make them yourself because of your incapacity.
How to Pick Your Fiduciaries
Appointing the wrong person to a fiduciary role is a common estate planning mistake. To keep you from making that mistake, consider the following five questions when considering someone for a fiduciary position:
- Does he/she have the necessary skills/experience? Not all fiduciary roles require special skills, but some do. A Trustee, for example, should ideally have a legal and/or financial background.
- Can the person be trusted? A fiduciary may need to make extremely important decisions and/or manage valuable assets. You must be able to trust a fiduciary unquestionably.
- Does appointing this person create any conflicts? There are numerous potential conflicts in an estate plan. For example, if your Trustee has an existing personal relationship with one beneficiary but not with the others, it can create a conflict.
- Will this person be capable of fulfilling the role? Does the person live close enough? Will his/her job allow sufficient time to perform the duties required? Will the person be able to set aside emotions and think clearly when necessary?
- Is this person willing to accept the job? Never assume that someone is willing to be your Executor, Trustee, Guardian, or Agent. Always ask them directly before appointing them.
Contact Los Angeles Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about picking the fiduciaries for your estate plan, contact the experienced Los Angeles estate planning attorneys at Schomer Law Group APCby calling (310) 337-7696 to schedule an appointment.