How to Choose the Right Fiduciary Agent

How to Choose the Right Fiduciary Agent

While you are alive, your assets are cared for in exactly the way you want, but do you know who will take care of things after you pass away? During the estate planning process, you will be asked to choose a fiduciary agent to serve on your behalf. Trustees, personal representatives, and powers of attorney are all examples of fiduciary agents. When you pick a fiduciary agent in your estate plan, you’re picking someone to make decisions in your and your beneficiaries’ best interests and in accordance with the instructions you leave. Luckily, understanding the basics of what each of these terms means and what to consider when choosing a fiduciary agent can make your estate plan work far better.

Trustee

A revocable living trust is often the center of a well-designed estate plan because it is simply the best strategy for achieving most individuals’ goals. In a revocable living trust, your successor trustee will be responsible for making sure your wealth is passed on and managed in accordance with your wishes after your death or incapacity. The role is two-fold: 1) the Trustee must manage the funds in the trust, growing the estate while ensuring that investments are balanced and protected, and 2) the Trustee will make decisions regarding distributions of income and/or principal to your beneficiaries. Like each of the following individuals involved in your estate planning, it’s essential to have a trusted person or financial institution carry out this vitally important role. That’s only part of the equation, however, as it’s also important to make the language in your trusts as clear as possible so that your trustee knows exactly how you would want them to handle various situations that can arise in asset distribution. Lastly, your trustee will only control the assets contained within the trust — another reason to be sure that you have properly and completely funded your living trust.

Powers of Attorney

Your powers of attorney are documents in your estate plan that appoint individuals to make decisions on your behalf (if you become unable to do so yourself.)  There is quite a wide range of situations covered by various powers of attorney, and we can help you decide which types you’ll need based on your current situation and future goals. Here are the two most common types to cover in your estate plan:

Financial Power of Attorney

The person you grant financial power of attorney will have the ability to take financial actions on your behalf. This can include purchasing life insurance, withdrawing money from your accounts, transferring funds from one account to another, paying your bills, and selling or buying property in your name. In most cases, powers of attorney are granted to family or friends, but in some cases it may be wise to consider appointing an institution, like a trust company, or professional fiduciary as your financial agent. Whoever you appoint will likely have broad powers to act in your stead, so it’s critically important you choose the right person.

Medical Power of Attorney

A Medical Power of Attorney allows an individual to make medical decisions on your behalf. Such powers also cover a wide range of specific actions that can be taken regarding an individual’s medical needs, such as approving medical treatments, determining incapacity, and electing to undergo additional tests or scans.

Personal Representative

Your personal representative, also known as an executor, is the person who will see your assets through probate if necessary and carry out your wishes based on your last will and testament. Depending on your preferences, this may be the same person or institution as your trustee. Many individuals chose to go with a professional entity for this role. This is someone who doesn’t stand to gain anything from your will, and is often the best choice if your estate is large and will be divided among many beneficiaries. Of course, family or friends can also serve, but it’s important to consider the amount of work involved before placing this burden on your family or friends. Serving as a personal representative can be hard work and may have court-ordered deadlines, so it’s crucial to pick someone you know will be up for the job. They may need to hire a CPA to help sort out your taxes, or a lawyer to assist in the process or to aid in dispute resolution. Therefore, choosing a spouse or someone else intimately involved in your life may not always be the wisest option, as they may not be up to the task at the time of your death.

Things to Consider

Before settling on a fiduciary agent to fill one or more of these roles, ask yourself:

  • are they trustworthy?
  • have they demonstrated financial and/or emotional intelligence?
  • do they manage their own responsibilities in a way that gives me comfort and confidence in their abilities?
  • would I want them in a long-term financial relationship with my beneficiaries? 
  • would a professional be a better fit for this position?

Get in touch with us today

Let us help you make the process of picking your fiduciary agent as smooth and headache-free as possible. Once you have these choices in place, you’ll be able to rest easy knowing that your estate is in good hands no matter what life brings. Give us a call to make an appointment today.

Dan McKenzie
Dan McKenzie
dan@themckenziefirm.com

Dan specializes in estate planning, estate administration, and small business counsel. He opened the McKenzie Law Firm in 2013, after spending 10 years as a litigator, seeing what can happen when people fail to carefully identify and mitigate their risks. He is pleased to be raising four kids in the same state where he grew up.