Q: What is a fiduciary?
A: Put simply, a fiduciary is someone who has responsibility for some aspect of your estate. There are several different roles to fill, depending on the type of plan you have in place. At its core, a fiduciary means there is a relationship of trust between yourself (as the person who appoints the fiduciary) and the person who is tasked with filling the role.
If you have a trust, you also have a Trustee. The Trustee is a fiduciary who prudently takes care of money or other assets according to the directions in the Trust. Likewise, financial advisers, financial planners, and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. The Personal Representative is appointed by your Will to be the fiduciary of your estate. Your Medical Power of Attorney is also a fiduciary, with responsibility for your medical care.
In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.
Q: What is the difference between a Trustee and a Personal Representative?
Trustee – An individual or entity that holds assets under the terms of a Trust Agreement. The Trustee always holds the assets for the benefit of the Beneficiary and must act according to the terms of the Trust.
Personal Representative – (In other States known as an “executor”). An individual or entity that settles the estate of a testator according to the terms of the Will. If an individual dies intestate (meaning, without a Will), or if the existing Will is found to be invalid, the Personal Representative will act in accordance with state laws. (In this instance, a person acting in intestacy may be called by a different name, such as administrator.)
Also important is the Power of Attorney – An individual or entity that has authority to manage assets during the incapacity of the principal.
Q: What are the duties and responsibilities of the Personal Representative and Trustee?
A: The Personal Representative must file the Will within 10 days of death, then determine whether to open a probate to handle the rest of the estate. During the probate process, the Personal Representative has responsibility for consolidating the estate, paying bills, resolving debts or disputes, maintaining or selling assets, and finalizing the distribution of the decedents property. The Trustee does a similar job, but with trust assets only. The Trustee may also have ongoing responsibilities to manage assets that are held in trust for the benefit of another person, or be called to manage trust assets during a period of incapacity.
Q: What is a Corporate Fiduciary and why would one be necessary?
A: A professional individual or organization may serve as a fiduciary. They can be appointed to spare family members the time and hassle of managing an estate, or to alleviate conflict between beneficiaries or interested parties.
Q: What is a Trust Protector and how are they appointed?
A: An independent third party (usually a professional such as a CPA or lawyer) who can be called on to arbitrate a disagreement between beneficiaries and trustees, and who has the power to change the terms of the trust when necessary. The trust document may include an Article that gives your beneficiaries or Trustee the right to request that a protector be appointed. Unless requested, there is no active Trust Protector in place. Our firm can be designated as the entity who can appoint a trust protector. We will name a professional third party who understands both the legal and financial side of trust administration.
Q: When would a Trust Protector be used?
A: In the event of an irreconcilable conflict between the trustee and the beneficiaries, or changes to the law that require changes to the trust, the trust protector could be used to resolve the problems.