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Choosing Fiduciaries in Estate Planning

By October 4, 2019November 1st, 2019Family Business Law

By: Heidi R. Kemp, Emens Wolper Jacobs & Jasin Law Firm

As an estate planner, one of the key parts to any discussion with clients is who will be named in the various fiduciary capacities within the documents we are drafting. Fiduciary capacities may include roles such as Executors, Trustees, and Agents to make medical decisions and financial decisions for you.

One of the biggest pieces of advice I give my clients during these discussions is to choose the right person for the job – because it is a job. A fiduciary carries a lot of responsibility and owes certain duties. One story I like to tell is of my own family. I have one sister and one brother. When my parents were doing their estate planning, one of them said “well, we haven’t named your brother for anything.” My response was “You aren’t handing out Christmas presents!” In my mind, my brother would be thrilled that he wouldn’t have to take on any of those responsibilities.

Naming someone in a fiduciary capacity is not a gift to that person. While that person may truly accept and appreciate the responsibility, it can be hugely time consuming and stressful. If you are choosing an individual – which many people do – then you need to really think about who the right person is. You want someone who is responsible, organized, dependable, and even-tempered. And, if you have someone who can compartmentalize their role of child (for example) and fiduciary, then, that’s even better. I hear so many clients discuss whose feelings might get hurt if they aren’t chosen. Or, when they can’t make a decision, they go with birth order because that seems “fair.”

When it comes to selecting the person to make medical and financial decisions, most people look to people they trust such as spouses, children, parents, siblings, or close friends. For your financial agent, the primary consideration should obviously be how financially responsible the person is. If he or she is not financially savvy or is not financially responsible with their own assets, why would they be different with your assets? For your healthcare agent, you want to choose someone who understands how you would make those decisions – someone who can be calm under pressure and who is not overly sentimental to the point he or she cannot make the decision that may need to be made.

An Executor is someone who is appointed to handle your probate estate. The Executor is responsible for wrapping up your affairs, collecting all of your assets, filing all of the necessary court paperwork, and then distributing the assets to the correct people. A Trustee is the person who is responsible for administering your trust in accordance with its terms. Often, trusts can last for years or even generations. Most estate administrations are shorter than trusts and once complete, the Executor is released from any further duty.

Both of these capacities carry fiduciary duties. If the trust continues, then the Trustee has many responsibilities as part of the administration under Ohio law. In addition, the Trustee has fiduciary duties and can be sued if he or she breaches any of those fiduciary duties. Many clients I have automatically name family members in these capacities. That may be perfectly fine. But, I do always try to have the conversation about what some of the duties will be so that they can choose the right person for the job.

I actually worked for bank trust departments before I went to law school and have administered hundreds of trusts. To me, one of the areas attorneys don’t talk about enough in estate planning is what the Trustee will need to do when the time comes.

Additionally, if the family situation is such that none of the family members should be named in the Executor or Trustee capacity, then I highly recommend that you consider a corporate fiduciary. There are pros and cons to a corporate fiduciary the same as naming an individual fiduciary. But, a corporate fiduciary does this kind of work all the time and is a professional. Policies and procedures will be in place to efficiently administer the estate or trust. And, the corporate trustee does not have a personal connection. This can be good or bad. But, even if your children get along right now, if one is put in charge and required to make decisions that not all of the other children agree with, then you could have tension and animosity amongst the children. A corporate fiduciary will certainly charge a fee for its services. But, depending on the situation, that fee may be a small price to pay in the total scheme of things.