Whether you are preparing your own estate plan or probating a loved one's estate, you might notice a great deal of legal jargon that may or may not be hard to understand. It's easy for us to explain what certain terms mean for our clients when we sit down and talk about their estate plan, and we understand that these new terms can be overwhelming for someone who wants to start their estate plan.
A common term that we often get asked about is “fiduciary,” and a common question is “What does a fiduciary do?” A fiduciary is someone who serves in a position of trust and responsibility. In the context of estate planning and probate, there are several fiduciary roles, such as the executor or administrator of a will (the person responsible for probating your estate), a trustee of a trust, an agent under a healthcare directive and an agent under a power of attorney. These fiduciaries play an extremely vital role in the estate planning and probate process by being responsible for carrying out your wishes and managing key roles.
Here is a breakdown of some common fiduciary roles to better understand their responsibilities in this context:
Healthcare agent: This is someone who is responsible for making healthcare decision for you if you become incapacitated and cannot make decisions for yourself. In the healthcare directive, there are instructions pertaining to how you would like to be cared for and there may also be guidance as to how long, or in which situations, you may wish to be on life support. This information is what your agent will use to guide the decisions they make for your care. To properly care for you as your healthcare agent they would need to know pertinent information such as - medications you take, allergies and health conditions you may have, a list of your physicians, and your health insurance information.
Durable Power of Attorney: This person will be responsible for managing your finances and personal business affairs when you are incapacitated, or perhaps at your request to assist you at other times. The agent is responsible for paying your bills (including insurance, debt payments, hospital bills, etc.), ensuring that any debt owed to you is received to help cover the costs of your bills, and managing your money. The information they would need to fulfill their duties include - identification of your bank accounts/credit unions/savings accounts, mutual funds and brokerage accounts, debts you owe, promissory notes and trust deeds owed to you, retirement accounts (including a Roth IRA or 401k), stocks and bonds, items of value (such as paintings, antiques, vehicles, jewelry, etc.), and the username and password to your email.
Executor: This person will be responsible for probating your estate after you pass away. This process includes submitting the Will to the probate court of your county, marshaling all your assets together, notifying lenders and beneficiaries, paying off any valid debts, distributing the remaining assets to your beneficiaries, and closing the estate. They would need the same information as your POA agent in addition to the location of the will.
Trustee: If you have created a revocable living trust in your lifetime, or perhaps have included a testamentary trust in your Will, your Trustee is the person who will manage the assets in the trust per the terms of the trust that you have set up, for the benefit of your trust beneficiaries.
Each of your fiduciaries can be different people but we also see clients designate one person with multiple fiduciary roles. It's important to understand that, although this is a huge role to fill for someone, this is not a role of honor. Keep in mind that your fiduciary is a person/people who act for you in a position of trust and confidence and has the legal duty to act in your best interest. So, when choosing who you would like to serve any or all of the fiduciary responsibilities, it is important that you trust the person and are confident that they are capable of being responsible for you and your loved ones. We view fiduciary selection as hiring someone for a job – you want to find someone with the right skills and abilities, and temperament, for each particular role, and that consideration should override thoughts of simply naming the oldest child or choosing someone because you've heard its done that way or tradition may call for that selection. Get the right people in the right roles as if you were making a hire for important positions, because that is really what you are doing.
Your fiduciaries will be responsible for a number of important duties and would need plenty information to fulfill their role. That's why we created a free estate planning list for your fiduciaries which helps you easily compile pertinent information that will be used to care for you and your loved ones if you were to become incapacitated or die. You can download that list for free here. If you have any questions about doing your own estate plan or need help with a probate matter, give us a call at (678) 344-5342 or contact us here.