Estate PlanninG

What to Look For When Choosing a Fiduciary

There may come a time in your life when you’re no longer able to make financial or medical decisions on your own. That’s why it’s so important to create a comprehensive estate plan that names a fiduciary - a person or organization that acts on behalf of someone else. While this might seem unnerving, these people or organizations are legally bound to act in your best interest.

For some people, choosing trusted decision makers is a no-brainer. For others, it may be more difficult due to family circumstances, geography, or simply the lack of living family members. Don’t worry if you can’t choose a family member or close friend to take on this role. You have the option of hiring a professional.

What are the roles I need to fill?

Financial Decision Makers

Executor or personal representative. This individual, appointed in your last will and testament, is responsible for collecting all of your accounts and property, paying any outstanding debts, and distributing your money and property to your named heirs or trustee. This person’s task is essentially to wind up your affairs at your death. This can be time-consuming, so you’ll want to make sure this person is ready and willing to take the time to accomplish what needs to get done.

Successor trustee of a revocable living trust. Serving after you, this trusted person or entity is charged with managing, investing, and distributing the money and property from your revocable living trust to you during your lifetime and to your chosen beneficiaries after your death.

Agent under a financial power of attorney. Your agent is an individual you choose to carry out financial transactions on your behalf (such as signing a check or opening a bank account). Subject to your state law, the type of authority and when the agent may act on your behalf can be specified in the financial power of attorney.

You have the option of selecting an agent to handle your financial transactions, whether at death or during a time in your life when you’re unable to manage them yourself. Here are your options:

  • Your bank or financial institution where you already have an account may have a trust department. Because they’re already familiar with managing your accounts, they may be a good fit to step in and assist you if needed.

  • Interview a private trust company that specializes in managing money on behalf of individuals. Because their job is to manage money and make distributions, they are well-equipped to handle the administrative tasks associated with being a financial decision maker.

  • Your certified public accountant or financial advisor may be willing to act on your behalf, or they may know someone who can.

Questions to ask potential candidates:

  • How much do you charge? You’ll want to make sure there will be money left over to give to your beneficiaries.

  • Do you keep records of the transactions you conduct on my behalf? Who has access to these records? A fiduciary must act in a person’s best interest by law. A certain level of transparency can put you at ease because you will know that even if you cannot manage your financial affairs, the right people will get the information they need and the wrong people will not.

  • How long does it take to administer an estate of my size? In most of these circumstances, time equals money. You want to make sure the professional you hire will wind up your affairs efficiently and quickly, without cutting corners.

  • How often do you communicate with the beneficiaries and my family members? It’s critical to avoid potential conflicts that everyone is on the same page and that the lines of communication remain open, even at your death.

  • Do you require that any special language be included in the estate planning documents or any additional paperwork be completed? Your estate planning attorney will want to ensure the documents that are being prepared will function properly when the professional financial decision maker needs to step in.

  • What has been your best experience administering an estate or trust? This question can help you get a sense of what they value and how they do their job. This will also help determine if you would be an ideal client for the professional.

  • What has been your worst experience administering an estate or trust? Take this opportunity to learn from others’ mistakes. Preparing ahead of time for smooth management and administration means that your financial needs—and those of your beneficiaries at your death—can be better met in a timely fashion.

Personal Care Decision Makers

Another often difficult decision to make is who will look after your safety and welfare, as well as your pets’.

Agent under a medical power of attorney. This person will make or communicate your medical wishes in the event you’re no longer able to make or communicate them yourself. In addition to naming someone, it’s important to complete an advance directive or living will to make your medical wishes known to the healthcare staff that could be treating you. For the sake of clarity, it might also be helpful to draft a letter of instruction to your agent explaining in your own words the types of medical decisions you would and would not make on your behalf. These types of instructions can be extremely helpful to guide your agent when it comes time for difficult decisions to be made.

Because of the sensitive and often emotional nature of making medical decisions for another person, a family member may not be the best choice for this role. You may want to consider naming a close friend or trusted professional instead. It’s worth noting, however, that state law may prevent certain professionals (such as doctors) from acting as an agent, unless an exception exists.

Caretaker for your pet. Although the law treats pets as personal property, you can still select someone to take possession of and care for your pet if you’re no longer able to due to incapacity or death.

If there is not a suitable owner among your family or friends, there are many organizations that may be willing to either take your pet or help your loved ones find a suitable forever home for it.

When interviewing potential candidates for your personal care decision makers for yourself and/or your pet, consider asking the following questions. Some of these questions are the same as those offered above for choosing financial care decision makers, but you will want to dig deeper when discussing them with these candidates.

  • Do you charge for your services? Some organizations may charge while others may not. It is important that you know ahead of time so money can be made available to cover these expenses.

  • When and how should you be contacted if your assistance is needed? You likely won’t be the one contacting them when you need their assistance, nor can you pinpoint when exactly you’ll need their assistance. Make sure someone can easily contact them in an emergency situation.

  • Is there additional information or paperwork needed to carry out your role? You will want to make sure that the person or organization has all of the necessary information prior to an emergency situation.

Not knowing whom to appoint to these crucial roles can easily derail your estate planning process. Do not let this initial uncertainty, or analysis paralysis, prevent you from taking the necessary next steps to protect yourself and those you care about.

We can talk you through your options to make sure you have trusted decision makers in place if/when the time comes. Call Santaella Legal Group, serving San Ramon, Danville, Dublin, Pleasanton & the Tri-Valley area, at (925) 831-4840.