Although you may not realize it, one of the most important aspects of creating your estate plan is appointing the right people to fill the fiduciary positions within your plan. In fact, one of the most common reasons for an estate plan to fail to work as expected is choosing the wrong person for an important position within the plan. People frequently appoint a spouse, family member, or close friend to fiduciary positions based solely on the close relationship. The problem often lies in the fact that most people do not really know what these fiduciary roles entail nor the important role they play in an estate plan. Because appointing the wrong person to a fiduciary position could derail your estate plan, the estate planning lawyers at Hedeker Law Ltd urge you to choose fiduciaries wisely.
What Is a Fiduciary?
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to the other one, who for example has entrusted funds to the fiduciary for safekeeping or investment. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice or protection is sought in some matter. The highest legal duty of one party to another, it also involves being bound ethically to act in the other’s best interests.
Examples of Fiduciary Positions in Your Estate Plan
Throughout your estate plan there will be several opportunities to appoint or nominate a fiduciary, starting with your Last Will and Testament. When you create your Will, you must appoint someone to be the Executor of that Will. Upon your death, the Executor will step in and take over control of your estate during the probate of the estate. Throughout that time, your Executor will be responsible for securing, managing and eventually transferring all of your assets to the intended beneficiaries. In addition, your Executor will also be responsible for reviewing and approving or denying claims made against your estate as well as paying those claims if approved. If the estate is moderate to large, your Executor may also need to calculate and pay any federal and/or state gift and estate taxes due.
If you decide to include a trust in your estate plan, something that many people do, you will need to appoint a Trustee. The overall job of a Trustee is to manage and invest trust assets as well as administer the trust according to the trust terms created by the Settlor (you in this case). Not only will the Trustee be responsible for managing and investing the trust assets, but he/she must also do so using the “Prudent investor standard” which requires the Trustee to effectively be more careful with the trust assets than he/she is with his/her own assets. The Trustee is also required to make low risk investments to ensure that the trust principal remains intact.
Yet another fiduciary role within your estate plan is an Agent under a Power of Attorney or an Advance Directive. When you appoint an Agent, you give that person the legal authority to act on your behalf in financial and/or legal transactions. Your Agent under a POA, for example, may have the authority to remove assets from your estate or enter into a contract in your name. An Agent appointed in an advanced directive typically has the authority to make critical healthcare decisions for you if you cannot make them yourself at some point.
As you can see, each of these fiduciary roles has a direct impact on your estate plan. Do not simply appoint someone close to you because you trust them. Instead, take the time to think about the position and the duties and responsibilities that go along with the position and then appoint the right person for the job.
Contact Illinois Estate Planning Lawyers
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding how to choose the right people for the fiduciary roles within your estate plan, contact an experienced Illinois estate planning lawyers at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.