First and foremost, someone you allow to act on your behalf is generally called a fiduciary. When you plan your estate you choose several fiduciaries, or people who will manage your affairs after you are gone (executor), make decisions about your health if you are unable to (medical power of attorney), and handle your money if you are incapacitated (financial power of attorney). You can choose one person to fill all these roles, or different people for each responsibility. Here are a few things to consider when you are choosing your fiduciaries:
1. Strengths & Weaknesses
We all have different strengths, and all get hung up by different things. Is the person who you want to be giving this responsibility to, well suited for it? For example, are you giving your financial power of attorney to someone with a history of managing money well? Do they have good credit? Is the person you’ve asked to be executor of your estate aware of the work that requires? Are they good at time management? Would this person be able to pay a bond premium (usually a few hundred dollars) if required by a court? Your attorney can discuss in more detail what questions you need to ask for each fiduciary you appoint. Take the time to sit down with your spouse or close family members and discuss what they would be comfortable taking control of.
2. Relationship
If you are married, a lot of these decisions can be easier. But a general rule in estate planning should be “don’t have a my-spouse-will-just-do-it-all mentality.” Yes, you will likely want to give them control of your health. But, you may not want to give them 100% control of the finances, especially if you have a blended family. Also consider that being executor of your estate maybe too much for them during that time. That’s a conversation you need to have now. If you are single, consider who is close to you in your family or friend group. Is that person going to treat you and your loved ones carefully and sensitively during this time? Don’t expect your close family members to assume you will be giving them these responsibilities—have a conversation with them!
3. Trust
You should trust the person (or people) you appoint as fiduciaries right now. Some clients are tempted because that brother-in-law they’ve never liked or trusted is a CPA, so he should handle my estate. That’s giving too much priority to a person’s strengths. The truth is, this is going to be a hard time for your loved ones. The person you appoint as executor needs to be someone you trust and also someone you trust to treat those you love well. When appointing your fiduciaries, trust is a must-have quality.
4. Plan B
Most estate planning attorneys are going to highly suggest you choose alternates. So, if someone you appoint as your financial power of attorney predeceases you, there is a second (and maybe third) string choice. You can also include a provision that allows your fiduciary to withdraw from their role and hand the reins to your alternate. In some cases, you can give your fiduciary the power to choose their own replacement. Or, you can appoint two people to act as co-executors. All these decisions, though have benefits and consequences that should be discussed with your attorney.
If you are running through these four things to consider and no one is coming to mind, you may need to appoint a corporate fiduciary. Next week on the blog, we will discuss choosing corporate fiduciaries and trustees. You can also reach out to your attorney and discuss other options. Appointing a fiduciary is an important decision that should not be taken lightly. Take the time to consider who is the best fit for each job and then discuss your options with your attorney.