A fiduciary is an individual or entity that has a legal responsibility to look after the best interests of an engaged party or parties. There are fiduciaries that play a role in the estate planning process, and we will take a look at the subject in this post.
When a will is used to direct asset transfers, the person that is recording their final wishes is called the testator. The testator must name someone to handle the estate administration phase, and this individual is the executor.
This is a prime example of a fiduciary. The executor will have a responsibility to serve the best interests of the beneficiaries, and this is a legally binding duty.
You should understand the fact that the executor must complete some relatively complicated tasks. First, the executor will admit the will to probate, and the court will provide supervision.
The assets must be identified and secured, an inventory will be conducted, and the executor will order appraisals if necessary. Property liquidation can be part of the equation as well.
While the estate is being probated, the executor will be the point of contact for beneficiaries and any other interested parties. An executor should be a good communicator that has the ability to act in a diplomatic manner.
Final debts will be paid during probate, so the executor will post a notice for creditors, and they are given time to submit claims. The executor will open an estate bank account, and final taxes and other debts will be paid while the estate is in probate.
When all the necessary tasks have been completed to the court’s satisfaction, the estate will be closed, and the executor will distribute inheritances to the beneficiaries.
Living Trust Trustee
If you have a living trust, you would act as the trustee while you are alive, so you would have control of the assets. In the trust declaration, you would name a trustee to succeed you, and this person or entity would be a fiduciary.
We use the term “entity” because there are professionals that provide trustee services. These would include banks, trust companies, some accountants, and there are law firms that provide trustee services.
Again, the trustee would have a fiduciary duty to the beneficiaries and the grantor of the trust.
After the death of the grantor, the trustee will distribute assets to the beneficiaries outside of probate. This is a major positive because probate is time-consuming, expenses consume a significant portion of the estate, and anyone that is interested can access the records.
The probate avoidance factor is just one of the benefits that living trusts provide, and we will look at some of the others in a future blog post.
Health Care Representative
Your estate plan should include documents called advance directives for health care, and one of them is a durable power of attorney for health care. You name a representative to make medical decisions on your behalf in this device, and the agent that you name would be a fiduciary.
The other directive that everyone should have is a living will. This type of will is used to state your preferences regarding use of life-support. If you have a living will, the choices that you made in the document would be honored without input from the health care agent.
Durable Power of Attorney for Property
To account for financial decision making in the event of your incapacity, you can name an attorney-in-fact in a durable power of attorney for property. This is another fiduciary, and powers of attorney are used for other reasons outside of the estate planning realm.
The general power of attorney gives the attorney-in-fact sweeping power to act as your representative in all matters. There is also limited power of attorney that is restricted to a certain action or a class of actions.
For example, you could give someone a limited power of attorney that would empower them to sign documents for you at a real estate purchase closing.
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If you are ready to work with a Glastonbury, Connecticut estate planning lawyer to put an estate plan in place, we are here to help. You can send us a message to set up a consultation appointment, we can be reached by phone at 860-548-1000.