One of the most important parts of planning for an estate is deciding who will be designated a fiduciary. This is a critical role and should be decided carefully. The person chosen will handle sensitive information, assets, money, and other financial matters. Diligence is the key when looking to name someone a fiduciary.

Understanding the roles of fiduciaries is crucial to selecting the right people for these roles and feeling comfortable that they will be able to adequately fulfill their responsibilities when the time comes. This article will review the typical fiduciary roles that are chosen when creating an estate plan and provide insight into how to choose the right person for each role.

What Is a Fiduciary?

A fiduciary is someone who acts on behalf of another person. This means that person has a responsibility to act in the best interest of another. A fiduciary will come into play when someone is incapacitated or has passed away. This person will make decisions for the incapacitated person and act on behalf of the deceased person’s wishes once they die. This person must act in good faith and is often given a great deal of authority in handling one’s affairs, so it is important to select them carefully.

The person chosen has a duty of loyalty and a duty of care to the person they are serving. They are expected to have the utmost integrity and honesty. The fiduciary will be required to follow the instructions contained within the estate plan of the person they are acting on behalf of. As such, this person must be fair and balanced and not someone who will act in their own interest.

Executor

One important fiduciary role in estate planning is that of the executor. This person collects all assets and ensures they are appropriately distributed according to the will. The executor will be named in the last will and testament of the person who they will be acting on the behalf of. Being named in the will isn’t enough to gain the authority granted to an executor of an estate, the named person will need to submit the will to the proper court, who will determine its validity and then provide documentation to the executor granting them this power. The executor’s tasks will include:

• Letting everybody know that the loved one has died, including beneficiaries, creditors, banks, and other entities
• Paying the person’s outstanding debts and settling estate bills
• Keeping a detailed record of assets
• Distributing the inheritance among the beneficiaries

These are some of the main duties of the executor. It’s important to note that an executor can also be a beneficiary in the person’s will. Executors can be paid for their work on an estate. There are even statutory amounts set out in the state law, but a different amount can be agreed upon by the parties involved when the estate plan is drafted.

Trustee

A fiduciary can be a trustee, who is obligated to carry out the instructions of a trust that is either created in the present day or upon someone’s death. This person manages the assets within the trust and distributes them accordingly to the beneficiaries. They also can make decisions on investments within the trust. The trustor (creator of the trust) does not have to give all the assets to the beneficiaries all at once. The assets can be given out based on certain milestones, such as graduating college, getting married, or having a baby. The main responsibilities for the trustee role include:

• Tracking and managing the assets
• Distributing the assets to the beneficiaries
• Reporting to beneficiaries when needed
• Keeping records of expenses and file taxes on trusts when needed

Because the job of a trustee is extensive, they too can be paid for their time. You can sit down with the person to discuss compensation and then specify those details within the trust. Like an executor, a trustee can also be a beneficiary.

Conservator

A conservator is a person who manages the affairs of an adult who is deemed unable to handle them for themselves. An individual may be considered unfit due to mental illness or a disability. The conservator’s duties may include everyday care, financial care, and even managing that person’s business interests. One famous example of a conservatorship arrangement was the one set up for pop star Britney Spears.

Britney Spears’ conservatorship dealt with two aspects of her life: her estate and financial affairs and making personal decisions on her behalf. After Britney’s public meltdowns, questions arose about her mental health and whether she was fit to be a mother. In 2008, the conservatorship was established, placing personal decisions and finances in the hands of her father, sister, and lawyers. After a court battle, her conservatorship ended in 2021, and she regained control of her life. So, as you can see, taking on the role of a conservator can involve legal challenges. The role comes with certain expectations and there can be consequences for not meeting them.

Guardianship

Designating a legal guardian for minor children is a serious matter. That person should be willing to take on the role of raising a child or children for years – potentially many years. They will be making choices that affect where and how they live and are educated, as well as medical decisions. For this reason, an experienced attorney should be consulted to help ensure the right person is selected, someone who is responsible, and physically and emotionally able to handle the demands of raising children.

Tips for Selecting the Right Person

As you can see, the responsibilities of fiduciary, executor, and trustee can be both sensitive and extensive. Choosing a person who will be a good fit for such a role should be made after thoughtful consideration. The person you select must be 18 years old or older and be of sound mind. A person can choose family members or friends for these roles. If you don’t want to go that route, another option is to choose professional executors or trustees. The professionals can be trusted companies, banks, financial advisors, or attorneys.

When making these decisions, we recommend that you consider:

• People who are organized and detailed-oriented. These jobs are complex and require someone with the skills to keep records and ensure everything is in the right place. They should also be skilled in noticing small details, so things stay intact.
• Does the person have time? Being an executor or trustee can take months or sometimes years. Do you believe that person has the energy and time to put into this process?
• Be mindful of conflict of interest for the fiduciary. Even though most of these roles allow for them to be beneficiaries as well, it can become too much of a conflict. So choose the most upstanding person you may know if you also make them heirs.
• How close is the person? It’s wise to choose a person in the same state or city as the trust’s creator or will. It may be hard for the person to conduct their duties if they live elsewhere. Also, the law may have additional obstacles for people who live out of state.
• When a loved one dies, families sometimes have unresolved issues. It’s important to choose someone most, or all family members can trust with the inheritance. Choose someone with good standing with the beneficiaries.
• Once you pick a person, be sure to talk with the person about the role and what that looks like in the event of your death. You can also consult with an attorney to help decide who could be a good fit.
• A person should also consider backups to their first choice for the roles. Just in case something happens to the person or they don’t want to accept the role, you’ll need a second choice, and maybe a third.
• The last option is choosing a professional to get the job done. These can be trusted entities you are familiar with or have done business with over the years. If the bank you’ve done business with for years has a trust department, you can go that route. A person can also choose an attorney to do the job for them.

The wrong person can bring about problems for your estate and heirs. For example, an executor, trustee, or fiduciary can act in their interest and mishandle the estate. If this happens, it is possible to have them removed but it involves a specific process. Beneficiaries can also sue the trustees and executors for losses and wrongdoing. However, that can be complicated, and you will have to prove wrongdoing on the fiduciary’s part. If this unfortunate event occurs, it is best to seek professional legal help.

How Rosenblum Law Can Help

Choosing trustees and executors is equally important as other decisions made during estate planning. Fiduciaries should be dependable, responsible, and ready to act when the time comes. Designating the wrong people can stress family members and even the fiduciaries, so it’s wise to choose carefully. At Rosenblum Law, we know that estate planning can be a challenging process. Our attorneys have decades of experience and can advise on all aspects of estate planning, including what to look for in the people selected to be fiduciaries. Call us today for an initial consultation.