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Who to Pick as Your Fiduciary

What is the Difference between Trustee, Personal Representative, Guardian, Agent, etc.?

By Christopher Guest

April 18, 2013

What is a Fiduciary?
Fiduciary - is a person or institution given the power to act on behalf of another (called the principal) in situations that require great trust, honesty and loyalty. The fiduciary is charged with managing the needs or property of another person, the beneficiary.
You can appoint or nominate the fiduciary to act in your best interest and must set aside their own personal motives in favor of your goals. You can also hire a professional to act in your best interest. Typical professionals hired are attorneys, accountants, or corporate trusts. But also, real estate agents, mortgage lenders, bankers etc. could be your fiduciary for non-estate planning issues.

Fiduciary relationships are characterized by certain fiduciary duties including acting with good faith, integrity, without bias (or conflict of interest), etc.

Types of Fiduciaries Part I

Personal Representative (Executor) is responsible for administering your estate in accordance with the terms in your Last Will and Testament. Only has fiduciary responsibilities to probate assets.
Can be an individual(s) Can be an institution such as a bank or trust company

Trustee is responsible for managing your assets that you title in your Revocable Living Trust or any other type of trust you create in accordance with the directions contained in the trust agreement. Only has fiduciary responsibilities to trust assets.
Can be an individual(s) Can be an institution such as a bank or trust company

Types of Fiduciaries Part II

Attorney-in-Fact - is responsible for managing assets that are titled in your individual name in accordance with the directions contained in your financial Power of Attorney (POA). Only has control over assets during principals lifetime and those assets principal states in POA.
Once principal dies, attorney-in-facts power vanishes. Can be an individual(s).

Health care Agent (surrogate) - is responsible for making medical decisions on your behalf in accordance with the directions contained in your Advance Medical Directive (AMD), also called a Medical Power of Attorney or Durable Power of Attorney for Health Care.
Cant be an institution or health care provider currently treating you.

Guardian/Conservator - is court appointed and responsible for taking care of you and your property if you're determined to be mentally incompetent by a court and in need of a court-appointed guardian to manage your affairs.
Guardian of person would manage affairs. Guardian of estate (conservator) would manage finances. Person/Estate role can be wrapped up into one person.

Guardian for Minor children

General Fiduciary Advice Part I

Make sure your fiduciary has the appropriate disposition for the appointment as a fiduciary. That need to meet the necessary fiduciary responsibility to be a fiduciary.
They will need to think about numerous competing issues. They will need to be responsible. Potentially good with money and numbers. Potentially can make good decisions, very quickly. Will have to act outside of their best interest. They will have to be able to delegate and understand when delegating responsibilities needs to be done. They will need to understand not everyone is going to be happy with decisions.

Have discussion with fiduciary prior to the fiduciary taking on the role to make sure fiduciary knows what the positions responsibility entails.
Time. Understand what you want. Different fiduciary roles have different responsibilities.

General Fiduciary Advice Part II

When selecting children in the role of fiduciary dont select a fiduciary merely because of:
Location Profession Oldest

Based on situation, try to name only one fiduciary. Appointing multiple co-fiduciaries (like co-personal representatives or co-trustees) can be asking for disagreement, discord and inefficiencies:
Co-fiduciaries will fight over a variety of aspects from the mundane to the important. If you appoint co-fiduciaries make sure there is a mechanism to break any disputes. Make sure documents do not inhibit fiduciaries to act without complete agreement of other co-fiduciaries. Financial institutions do not like co-fiduciaries. The first fiduciary might not want the role. The first fiduciary might not be able to fulfill duties as fiduciary because of death, incapacity or inability to qualify for the role. The first fiduciary might have to step down after being appointed. Successor fiduciary can fill role very quickly if named in document v. potentially going to court to name a successor fiduciary if no successor fiduciary is named in document.

Always have a successor fiduciary listed in any document you have. Reasons:

Consider the age and capacity of the appointed fiduciary. Make sure to update your fiduciarys based on life changing events

How to Pick a Personal Representative

If married, most people select their spouse as their personal representative for a variety of reasons.
Spouse has better idea of financial affairs and location of documents. Many times, a persons will gives everything to the spouse and requires less paperwork in probate.

Make sure successor personal representative is named in will. If not married or spouse predeceases you, then decisions will be need to be made.
Try to select a personal representative that is a resident of Virginia. VAresident personal representatives are given more leeway in probate. Non-VAresident personal representatives will need to put up a surety (meaning more costs to estate) unless resident co-personal representative is appointed. Select someone that knows where your documents are and can access them.
Be aware of safe deposit box issues.

Select someone that can manage pay off debts, marshal assets, distribute assets and manage other affairs. The process can take many months to several years.

How to Pick a Trustee?

If married, most people select their spouse as their trustee for a variety of reasons.
Spouse has better idea of financial affairs and location of documents. Many times, a persons trust gives everything to the spouse. There are some ramifications if the trustee is only trustee in some trusts

However, in revocable trusts that become irrevocable or irrevocable trusts that are used for spousal support (like a SLAT), you might want to name a different person trustee or a co-Trustee
This is due going beyond HEMS standard for invading principle of trust.

Make sure a successor trustee is named to ensure continuity in managing the trust. It is preferred that the trustee is nearby but no requirement. If not married or spouse predeceases you, then decisions will be need to be made.
Trustee should be someone that understands the big picture. Trustee can manage money and account to other beneficiaries. Understands that there could be the appearance of a conflict of interest if trustee will be eventually become a beneficiary.
This is very important in second marriage families when child from first marriage is named trustee for trust that is to be used to support second marriage spouse.

As you age (married or single), you should think about adding a co-Trustee that can act if you become incapacitated.
Much easier for co-Trustee to take over duties than go through process of resigning and successor Trustee takes over.

Corporate Trustees?
Reasons for:

Reasons against:
Lack of personal connection by the corporate trustee. Beneficiary disagrees with the financial management by the corporate trustee. Corporate trustee can be very expensive via their management fees and costs. Turnover of employees in corporate trustee's offices creates changing trust management philosophy or disjointed communications between beneficiaries and corporate trustee. Inability of corporate trustee to properly manage a closely held business, farm, or other business entity held by trust. Corporate trust departments might lack flexibility to deal quickly with unexpected but important trust administration issues increasing beneficiary's anger and frustration with the management of a trust.

The advantages of years of experience in managing other trusts that can be applied to your trust. Better management of a trust because the corporate trustee's entire job is being a trustee. Better investment experience. Greater oversight of the trustee because corporate trustees are regulated by federal and state laws. Professional advice that will be objective and not swayed by emotion, sickness, vacation or any other issue that might impact an individual trustee. Access to special resources that allows for more efficient management of trust. Avoiding potential conflict of interest that arises when a trustee is also a beneficiary of the trust. Avoiding potential family strive or increasing strive that might arise by naming one beneficiary trustee over another.

How to Pick an Attorney-in-Fact? (POA)

If married, most people select their spouse as their attorney-in-fact (AIF) for a variety of reasons.
Spouse likely already has control of assets. Spouse is likely to know of assets or properties existence. Usually given some deference.

If married, need to be aware of your spouses capacity. If capacity and issue is concern then spouse shouldnt be AIF. If not married or spouse has predeceased, you might want to think about appointing an AIF. But, who? Ask yourself these questions:
Do you trust this person with your important financial and other legal affairs? Is this person financially responsible? How do they manage their own financial and legal affairs? Will the potential agent charge you a fee? Family members usually perform the service gratis, but if you pick a lawyer or accountant, a fee is usually involved. Will this person agree to serve as your Power of Attorney agent? You should discuss your decision with them and they should agree before you officially appoint them.

Proximity is an issue. But, not requirement. Financial Institutions do not like to have more than one AIF on documents and will require your AIFs to jump through numerous hoops.

Other Attorney-in-Fact Issues

Be careful in listing children on bank accounts you want to give them signing authority not put them on the title of the account One concern whether to make POA a springing POA. Two thoughts
First, an agent usually needs to act when principal in distress thus want springing aspect to be easily met. If high bar to spring then could cause delays. Second, do not trust anyone fully might set higher bar.

Contentious family relationships can result in multiple POAs and number of issues. If you revoke and sign a new POA make sure to destroy the old one. If you own a business or atypical asset, you might want to be sure the AIF has right qualifications to oversee/manage that asset. You might want to appoint the same person as AIF as

How to Pick an Agent/Surrogate?

If married, most people select their spouse as their agent for a variety of reasons.
Spouse will know the answers to difficult medical and health care issues. Spouse is usually point of contact for emergencies.

If not married or spouse has predeceased, then need to think about several issues:
Location. Is the agent nearby? You could have a long illness that would require many doctors appointments and they might need to attend these appointments. Is your agent assertive. Agent will need to assert your wishes in the face of a stubborn medical establishment -- and against the wishes of family members who may be driven by their own beliefs and interests, rather than yours. (See Terry Schiavo) Is the person your AIF? There might be times when it being the same person and aware of all of your finances might be helpful.

Do not appoint more than 1 person agent because that will automatically create conflict. But, you should appoint alternative agents. It's better not to name anyone than to name someone who is not comfortable with the directions you leave -- or who is not likely to assert your wishes strongly. But, make sure to draft living will.


Christopher M. Guest, Esq.

888 16th St., NW, Suite 800 Washington, DC 20007 202.349.3969 Email: cguest@guestlawllc.com Twitter: @vaestateplanner Northern Virginia Office Arlington, VA 22207 703. 237.3161 Website: www.guestlawllc.com Blog: vaestateplanner.wordpress.com