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Several months ago, I wrote a short blog on the need to have an experienced attorney assist in the preparation of your will. Of course, that still goes for a myriad of reasons:
- Your attorney should know, in addition to drafting a will, how to probate a will (actual court filings);
- Your attorney should understand real estate law;
- Your attorney should understand tax law;
- Your attorney should have some understanding of the probate laws of other states (especially if you own real estate outside of Texas); and
- Your attorney should understand your family dynamics.
Today, I want to speak with you about selecting the proper person(s) or institution(s) to serve as your fiduciary.
LET’S DEFINE FIDUCIARY
For purposes of this blog, a fiduciary is someone you designate to handle matters for you if you find yourself incapacitated, either mentally or physically, or due to death. Obviously, therefore, fiduciaries must be chosen in advance. Here are the most typical fiduciaries in the estate planning process:
- Economic Power of Attorney (usually referred to as a durable power of attorney): this is the person, or institution, that will make economic decisions on your behalf if you find yourself incapacitated. This can be paying monthly bills and medical expenses extending into stock trades and real estate transactions. It is important to always bear in mind that this agent’s authority ends upon your death.
- Trustee of a trust: If you place assets in a trust, either while living or upon your death, someone must manage these assets – that person is referred to as the trustee of the trust. A trust may last many years into the future, so it is important to have some continuity and a process for successor trusts. For instance, if the trust is expected to last for 50-years, you may want to chose someone to be the trustee who is younger than 85 years of age, or, at least, have a process for the designation of a successor in the unlikely instance of your initial trustee not serving to the age of 135.
- Medical Power of Attorney: this is the person, or institution, that will make medical decisions for you if you find yourself incapacitated. This can include a choice of hospital or assisted living facility, medical decisions such as medications and surgeries, and end of life decisions.
- Executor of the Estate: this agency arises only upon your death. This individual, or institution, is tasked with “winding up your economic affairs” and distributing your assets to those you designate by will (or if no will, by operation of law).
RUMINATIONS ON A GOOD FIDUCIARY
As a preliminary matter, remember that being a fiduciary is a responsibility – not an honor. Often, I have clients concerned that by naming child A the executor of the estate, instead of child B, that somehow child B will feel slighted. Legally, nothing could be further from the truth. The selection of a fiduciary should be based on who can best serve, considering among other things, the following:
- Some level of expertise. For instance, someone familiar with medical matters, such as a family member who is a doctor or nurse, should probably be strongly considered to hold your medical power of attorney. The person who is going to hold your financial power of attorney should have some working knowledge of financial matters, such a legal, investment, or accounting background.
- The person should be reasonably available. If you live in Texas, having a child in Singapore responsible for your health care may be problematic. If you have a heart attack, time may be of the essence. Rather, try to find a responsible family member or friend that can “step in” promptly. Estate executors should be available, able, and have the time to administer estates and distribute assets. This is not an honor – it is a job. And it can be a time-consuming one.
- This person should be honest. If you must ask whether they are honest – then you do not want them. Upon your death, the estate does not belong to the executor. The assets belong to your heirs, either by your will or if none, by law. The executor is charged with distributing assets – not keeping them for himself or herself. And the distribution should be as prompt as legally possible.
- Consider appropriate compensation. Often, mother designates her lawyer son as the executor to serve without compensation; however, that child, who may in fact be mother’s secret favorite, may find himself or herself working really, really hard to his or her unappreciative siblings (Gimme Daughter A, Gimme Daughter B, and Gimme Daughter C). Consider allowing the executor to collect a reasonable fee, which he or she can choose to waive if the heirs are reasonably cooperative.
- A word about institutional fiduciaries. If practical, they should be avoided. First, always remember that they will have to be reasonably compensated – for them, this is a business – with no fond memories of familial love to guide them. Second, they will in all probability be quite inflexible in the administration of the estate or trust – they are bound by laws, the terms of the will or the trust, irrespective of the wishes of the heirs. Of course, there are businesses that will serve as medical fiduciaries, but, again, remember they will be bound by societal norms as opposed to any out of touch with society beliefs you, or your children, may hold. An institutional medical fiduciary will see that you get a COVID-19 vaccine even though you and your children believe them to be dangerous.
Picking fiduciaries (financial and medical) is an important task and must be done only after thoughtful reflection. These folks or institutions may have to do – a lot of work, and – make some tough decisions.
We are a full-service law firm with a significant wills, trusts, and probate practice. When it is time to draft your will and identify your fiduciaries, we work with you to assure that all you needs are considered and addressed. You might as well get what you want – you might as well understand your legal documents – and you might as well get it right!
by Jack M. Wilhelm
Edward Wilhelm and Jack Wilhelm provide tremendously high value legal assistance to a large number of very desirable clients.
THE WILHELM LAW FIRM, 5524 Bee Caves Road, Suite B5, Austin, TX 78746; (512) 236 8400 (phone); (512) 236 8404 (fax); www.wilhelmlaw.net
DISCLAIMER: The information on this site is not intended to and does not offer legal advice, legal recommendations, or legal representation on any matter. You need to consult an attorney in person for legal advice regarding your individual situation.