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How To Pick A Fiduciary

How To Pick A Fiduciary

Part of estate planning requires you to select and name several fiduciaries.

What is a fiduciary?  A fiduciary is someone whose role requires them to act in the best interest of another (i.e., the beneficiary).

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In your estate plan, you will have at least four fiduciaries to name, and there could be more depending on the complexities of your estate.

  1. Medical Power of Attorney. Will act in your best interests in dealing with medical issues if you can no longer make those decisions for yourself. Guidance is provided from your perspective through the power document and other ancillary documents such as a Living Will.
  2. Financial Power of Attorney. Will act on your behalf concerning all financial matters outlined and within the powers granted in the power document. The power document can be enacted immediately or upon an event such as you not having the capacity to act on your behalf.
  3. Personal Representative. Will be responsible for settling your affairs after you pass to the extent other fiduciaries are not given some of the responsibilities. Mainly, this person is responsible for administering your Will and shepherding any probate, if required.
  4. Trustee. Will be responsible for administering your trust during any period of incapacity or upon your passing. If you are a business owner, you may name two trustees – one for the business and one for everything else.

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You might ask why there would be a unique business trustee.

As with any fiduciary you select, you should name someone to fill the role chosen who has the background, education, experience, acumen, and availability to handle the tasks you are selecting them for. This means you need to consider your selections and not just pick Uncle Joe because he was a banker at one time.

You should also pick backup fiduciaries if the primary one selected cannot or chooses not to act on your behalf. Sometimes it may even be best to choose co-fiduciaries, especially if independence is needed at times.

What things should you consider?

  1. Who is comfortable asking questions and making decisions in ways that might be different from how your heirs would decide?
  2. Who has medical and/or financial expertise?
  3. Who will stick up for you when you can’t? Who can you trust?
  4. If needed, who pays attention to details and can work with trusted advisors such as accountants and attorneys?
  5. Who is local to where the decisions may need to be made? (Though not critical in today’s electronic world, it can still be an advantage in some situations.)
  6. Sometimes it is about who doesn’t have their own problems or can offer the time and energy necessary.

Even if you think you are picking the right person or institution (yes, you can choose corporate fiduciaries but probably not for any power-of-attorney role) for each role, communicate with them to gain their willingness before finalizing your documents.

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Fiduciary duties and responsibilities can be vast and burdensome. SVA can help in many ways and we can even offer guidance in selecting your fiduciary.

Sometimes those you select as fiduciaries do not have the necessary experience, time, or specialized knowledge to interpret and carry out the terms of the estate documents. SVA can act as an advisor for a fiduciary such as a trustee to carry out the trust requirements, including the management and record-keeping of the trust assets.

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Biz Tip Topic Expert: Richard Kollauf - JD, CPA, CFP, AEP

Richard Kollauf - JD, CPA, CFP, AEP

Richard is a Principal for SVA Certified Public Accountants and has more than 35 years of experience working in financial, accounting, and legal operations. Richard’s expertise in the multi-faceted financial environment includes business succession planning, tax, investments, finance, mergers and acquisitions, estate planning, and trust administration. He also has experience in estate planning and distribution for complex operational and investment multi-state businesses. Richard provides income tax consulting services to closely-held and family-owned businesses, as well as high net worth individuals.

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