What Is A Fiduciary And Why Are They Essential To Estate Planning?
A fiduciary is essentially a named person or entity who is given the job of acting in the best interest of a principal. The principal is the person who has signed the legal documents naming the fiduciary and giving the fiduciary their power and authority. Fiduciaries are named in all estate planning documents. A living trust fiduciary is called a trustee; a will’s fiduciary is called a personal representative. A fiduciary under a durable power of attorney is called an agent or attorney-in-fact. In Florida, the medical fiduciary, under a designation of healthcare surrogate, is called the healthcare surrogate. In all these legal documents, the role the fiduciary plays is acting on behalf of either you or a group of beneficiaries, upon certain events occurring.
Should I Accept The Role Of Fiduciary?
Whether or not you accept the role of fiduciary depends on you and your time, skills, honor, integrity, and aptitude. Fiduciary is an important role and with that role can come personal liabilities, if you do not fulfill the role correctly and with good and reasonable intentions and efforts. Accepting the role of fiduciary is typically a given when it is a child acting for a parent, and the child lives in close geographic proximity of the parent. Geographical location is not the end-all-be-all, but it can make things harder. Relationship is not the end-all-be-all either. You can become a fiduciary for your friend, but you should not accept that role if you are not in it for the long haul.
If you are asked in advance to accept the role of fiduciary, give strong consideration to whether or not you will follow through, regardless of the situation. Of course, exceptions are made if you are in the military or if you are in an accident and cannot serve through mental or physical disabilities. If you have been named as a fiduciary, you are not legally compelled to accept the role. You should make a quick decision, however, so that any backup named fiduciaries can act. Sometimes, decisions have to be made very quickly in a fiduciary role.
Is being A Fiduciary A Legal Role? Who Am I Answering To?
A fiduciary is a legal role. With that legal role, you have legal duties and if you do not meet those duties, you can face personal liability that can affect your assets. Who you are answering to depends on the particular fiduciary role that you have accepted. In the world of trusts, you would be acting with a high level of care and integrity towards those beneficiaries under the trust. The same loyalty requirements and care requirements apply to someone who has been named as personal representative under a will in Florida. That person has fiduciary responsibilities to beneficiaries but also to creditors of the estate.
Under a durable power of attorney, the person named as agent has a fiduciary duty to the principal or the person who has signed that durable power of attorney document. The same rules apply with the designation of a healthcare surrogate. There could be arguments made regarding extended family members and future beneficiaries and their rights as it relates to you performing actions under a durable power of attorney, but it is the person giving you that authority whom you have a duty towards.
What Is The Difference Between Being An Executor And Administrator Of An Estate?
In estate law, in the United States, there is a variance of terms used for the person in charge of handling and administering an estate of a deceased person. In Florida, the person who is named to settle an estate is called the personal representative. In other states, this role is called an administrator or executor. Before the personal representative is appointed, if there are any issues with who can be the personal representative or other types of pre-administration issues, the person appointed is called the curator. A curator, in Florida, can handle a probate estate prior to the appointment of a personal representative. If there are issues within an estate regarding people who need representation, such as minors or incapacitated people, the court can appoint attorney ad litems and administrator ad litems to address those legal issues to closure.
How Do I Choose The Right Fiduciary?
Choosing the right fiduciary is quite a challenge and is not to be underestimated. It is easy if you have one child and he or she is the golden child and has done everything right in their life, and will do anything for you. However, you may have some additional challenges that need to be considered, depending on your situation. You need to decide whether you want one fiduciary or co-fiduciaries. You also need to decide on backups who would be successor fiduciaries. You need to decide between individual fiduciaries or professional fiduciaries.
The first consideration is proximity. Proximity is not an end-all-be-all consideration because highly educated, organized, and tech-savvy adults can do a better job than a child living across the street who is a lazy, dependent adult child. Proximity is a factor, however, if the child you name as healthcare surrogate is to take you to all your medical appointments and so forth.
Another factor is birth order. A lot of people like to go the traditional route of naming their first-born son as the primary fiduciary on their documents. Some people choose the first-born child. This line of thinking and reasoning can make sense if you have multiple great children and you do not want to hurt anyone’s feelings. However, this child may not necessarily be the person who is most capable of properly fulfilling the role of a fiduciary under your legal document.
Positive factors you want to choose in a fiduciary can include aptitude. If someone has an aptitude towards financial or medical issues or prior knowledge and skills, they are more equipped to manage and organize your finances or medical issues. Time is another factor in choosing a fiduciary. Becoming a fiduciary can be time-intensive, depending on your needs. If you are diagnosed with dementia in your early 60s, you could live another 10-15 years with a fiduciary managing your finances on a day-to-day basis. You have to think about the people you name and whether or not they would be willing to devote that time to you.
Another lead factor on choosing a fiduciary is integrity. When you are naming someone as a fiduciary in your legal document, they are going to have the ability to go into your bank account, remove your money, and put it into their own bank account. You and your family can sue that person if you can find them. If the person has already spent all the money on drugs, you have no recourse to get your money back. You need to select people with as high degrees of integrity as possible. The person you name may not have anyone closely watching them day-to-day. When people who lack integrity feel like they are not being supervised, they may let things lapse, fail to follow through, or not be a good record-keeper.
You want to find someone with good organizational skills. This person has to be able to manage your finances and make your medical decisions based upon the information presented to him and her. This is difficult to do while doing other jobs and maintaining their own personal finances. If the person is not organized, mistakes can occur. If you do not have anyone in your life that fits the bill, then you need to consider a professional fiduciary. The marketplace for professional fiduciaries is ever-changing, so it is something that you want to discuss with an attorney.
The last consideration to think about when choosing fiduciaries is whether to name a sole person or have multiple fiduciaries on a given issue. Typically, multiple beneficiaries need to all be on the same page or else you are putting your affairs in the hands of a potential dispute that could end up in court. If you do not have multiple beneficiaries who are all on the same page, co-fiduciaries will not work. If you do, co-fiduciaries can delegate amongst each other so that it is not as time-intensive for just one person. The best way to make a final decision is to work with an attorney who can ask questions and confirm your thinking on the matter.
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