Latest News / Planning Thought: Choosing a Fiduciary
Planning Thought: Choosing a Fiduciary
May 22, 2019
Attorney Stuart Bear gave a presentation at the 2019 Heckerling Institute on Estate Planning titled “Why Can’t My Brother-in-law Bob be the Executor of My Estate?” He reviewed some of the important, practical considerations for choosing the best fiduciary to supervise the implementation of an estate plan, beginning with this job description:
- “Correspond with disgruntled beneficiaries;
- Manage family drama;
- Provide accounting to disgruntled beneficiaries;
- Invest assets (don’t lose money or you will hear from disgruntled beneficiaries); and
- Receive phone calls from disgruntled beneficiaries inquiring when they will receive their inheritance (but remember, it’s not about the money).” Some highlights from his talk are below.
Resist the first impulse
Very often a client’s first thought in selecting an executor or trustee is that either a spouse or adult child can handle the job. Bear recommended probing the family dynamics before greenlighting such a decision. Sample questions might include:
- Do your children communicate regularly?
- How would one child react to his or her sibling receiving compensation for managing and distributing assets?
- Is any child likely to demand an inheritance immediately?
Clients often need to be brought up to speed on what fiduciary duties are, how much time and expertise they may require, and the value of having an impartial third party involved in decisions that may not always be popular.
The benefit of naming an individual to serve as fiduciary chiefly is familiarity with the client’s values, family members, and family dynamics. There is a perception that an individual will be less costly, or may even waive fees for serving as fiduciary. Bear warned that most individuals will need to hire experienced professionals to help in the discharge of fiduciary duties, so the total cost of administration actually may be higher with an individual in charge.
Corporate fiduciaries bring experience, expertise, professionalism, and objectivity to the jobs of trusteeship and estate settlement, noted Bear. Continuity of service is another advantage. Although there may be employee turnover, and the banking industry has experienced a series of acquisitions and mergers, a trust division doesn’t take vacations, get sick, or move out of state. Corporate fiduciaries are regulated and bonded.
Bear recommended interviewing a handful of candidates before deciding upon a corporate fiduciary. Sample questions include:
- What services will be performed?
- What services will not be performed?
- Are distribution requests handled by an individual, or by a committee?
- How long does it usually take to decide on a request for a discretionary distribution?
- At what asset level would the trustee terminate the trust and distribute the assets outright?
- Will specific language need to be included in the trust document?
If the client is having trouble deciding between an individual or a corporate trustee, it may be possible to have multiple fiduciaries, a sort of “best of both worlds.” However, someone needs to be in charge, and that should be made plain in the estate plan. Don’t overlook the importance of planning for the selection of a successor trustee, perhaps through the appointment of a trust protector.
Attorney Bear offers to facilitate a family meeting for his estate planning clients, to be held in his office. To get everyone on the same page, he said, everyone needs to be in the same room. The meeting should include the nominated fiduciaries and the client’s children. There is sometimes a question about including the spouses of the children, but Bear prefers to have them attend as well. It provides for better control of the message, and is likely to reduce future conflicts.
A family meeting will be especially important for a second marriage or blended family situation, if specific property will go to specific beneficiaries, if assets will be distributed unequally, and if there will be a hierarchy in the nomination of fiduciaries. The goal is to avoid surprises and reduce future conflict after the death of the client.
When the client is quite certain of the plan for the disposition of the assets, the family meeting should be scheduled after the documents have been signed. However, if the client is uncertain about the plan or the choice of fiduciaries, it may be better to have the meeting earlier.
Bear opens the family meeting with a discussion of wills, trusts, and the respective roles and responsibilities of personal representative, trustee, attorney-in-fact, and health care agent. He summarizes the planned distribution of assets, and then turns the meeting over to the client. The client then may explain the thinking behind the distribution plan and the choice of fiduciary or fiduciaries.
Bear concluded his presentation by saying: “Educating clients on fiduciary selection and fiduciaries on their duties can go a long way to ensure the success of any given estate plan.”
© 2019 M.A.Co. All rights reserved.
Securities and insurance products are offered by Cetera Investment Services LLC (doing insurance business in CA as CFG STC Insurance Agency LLC), member FINRA/SIPC. Advisory services are offered by Cetera Investment Advisers LLC. Neither firm is affiliated with Centier Bank where investment services are offered. Advisory services may only be offered by Investment Adviser Representatives.
Securities and insurance products offered by Cetera Investment Services are: *Not FDIC insured * May go down in value * Not financial institution guaranteed * Not insured by any federal government agency * Not deposit products.
Investment Executives are registered to conduct securities business and licensed to conduct insurance business in limited states. Response to, or contact with residents of other states will only be made upon compliance with applicable licensing and registration requirements. The information in this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase brokerage services to persons outside of the United States.