When preparing your will, power of attorney or trust, you should always consider appointing an independent professional executor, attorney-in-fact (“agent”) or trustee, whether as the sole fiduciary or as a co-fiduciary. Why? Professional fiduciaries have the experience, knowledge, depth of players and independence to be able to handle your financial affairs in the event of your death, incapacity or incompetency.
Experience and knowledge in handling your financial affairs is important in that managing your assets for you involves the interpretation and application of laws relating to fiduciary relationships, taxes, the proper application of income and principal to different situations, etc.; many of these laws are extremely complicated. A family member or loved one requested to serve as your executor, trustee or attorney-in-fact (agent) will have to and should hire CPAs, attorneys and financial advisors to help him with all aspects of your financial affairs and the proper application of laws; an independent professional co-fiduciary potentially can replace many or all of these additional expenses in a centralized location with no learning curve – they do this for a living.
A mistake with your financial affairs for a fiduciary who is a loved one can be extremely costly for him in that beneficiaries of your estate or trust will be quick to sue even if there is a personal relationship. If you have a disabled beneficiary of a special needs trust, a mistake with a distribution can disqualify that beneficiary from receiving governmental benefits. An independent fiduciary or co-fiduciary can be a check and balance to a family fiduciary, a brake on bad decisions and a deep pocket in the event a mistake is made. More importantly, an independent professional fiduciary will do everything in its power to avoid being put in a situation wherein it is sued for a breach of fiduciary duty or negligence with your assets, and its knowledge, experience and procedures will likely ensure that a mistake with your assets will not occur.
A loved one having to serve as your attorney-in-fact (“agent”), executor or trustee rarely ever occurs at a good time for your loved one. Imagine your whole financial life, warts and all, being dumped on another individual. Perhaps you have complicated financial situations which you have avoided handling; a family fiduciary has no choice but to handle them. Wouldn’t it be easier for that family fiduciary if there is someone to help him or her with this situation, help to shoulder the burden? An independent, professional fiduciary can help. In addition, having this professional can make it easier for your loved one to handle these matters on your behalf notwithstanding what occurs in his life (e.g., divorce, death, bankruptcy, depression, etc.).
Is there harmony in your family? Do you have children from a prior marriage or a new spouse, or do your family members hate one another? Even if there is harmony in your family, money does strange things to people and always has the potential of ruining any relationship that your family has; putting a loved one in a firestorm does no one any good. An independent professional fiduciary can make the hard decisions impartially and without emotion and can be the “toughie”. It is not easy to say NO to a family beneficiary especially when a familial relationship is already strained – an independent professional fiduciary can easily say no where it is needed or when the terms of the trust dictate a result other than what the beneficiary wants. To such an individual or institution it is not family, it is merely a job.
How long can a loved one serve as fiduciary? Does he have the ability to serve for years or decades? If you have dementia or have a trust for a minor or an incapacitated beneficiary, the job of acting as an attorney-in-fact (agent) or trustee could last for decades or the remainder of the beneficiary’s lifetime. Is it truly possible for a family member, even a sibling, to serve for that period of time or do the job properly for decades, especially when life gets in the way? A corporate professional fiduciary, if available, is the constant in that beneficiary’s life always serving its role with a deep bench of professionals to step in and take over in any circumstance.
When you are considering an executor, attorney-in-fact (agent) or trustee, you should always consider a professional fiduciary along with or instead of a family member or loved one. While attorneys at Weaver, Bennett & Bland, P.A. serve as executor, attorney-in-fact (agent) or trustee for clients, and we can help, professional fiduciaries should always be considered to serve in these roles.
Eran L. Weaver is an estate planning, estate administration and business attorney at Weaver, Bennett & Bland, P.A. Contact Eran at Weaver, Bennett & Bland, P.A. at (704) 844-1400. The information contained in this article is general in nature and not to be taken as legal advice, nor to establish an attorney-client relationship between the reader and Eran L. Weaver or the law firm of Weaver, Bennett & Bland, P.A.
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