By its very nature, much of the administration of an estate plan takes place upon the creator’s death or incapacity. For that reason, selecting the proper persons to serve as fiduciaries is arguably the most important decision that one can make. To clarify, a fiduciary is a person with a very close legal relationship to another person or entity, who is subject to a field of jurisprudence designed to ensure the utmost level of care and loyalty. In the estate planning realm, common types of fiduciaries are Executors of wills, Trustees of trusts, Attorneys-in-Fact acting under a durable power of attorney, Health Car Proxies, and Guardians and Conservators of minor children or disabled adults.
When selecting a fiduciary, it’s important to consider the scope of the fiduciary role. For example, an attorney-in-fact is tasked with managing finances, so it makes sense to select someone with financial skills. Similarly, your health care proxy should share your views on extraordinary medical care, and your children’s guardian should share your views on parenting.
Although it’s easy to define the ideal candidate to serve as fiduciary, it is often much harder to find them in real life. Many clients struggle to find someone that they truly trust when their life and livelihood are on the line. Others seem to have too many close relatives and friends, and they don’t want to pick one at the risk of offending another. In the end, making the right choice is up to that person; their attorney can talk them through it, but the decision is theirs to make.
I often explain to clients that there are two schools of thought. First, if there are relatively few trusted candidates, it can make sense to have the same person fulfill several or all fiduciary roles. This allows a high level of convenience and effectiveness, because there is only one point of contact for all of the client’s affairs. It also avoids the challenge of finding multiple trusted candidates. However, this solution requires a tremendous amount of trust, because the one fiduciary has a tremendous amount of power.
The second school of thought is that it is better to nominate different people to serve in different fiduciary roles. This avoids the problem of “having all of your eggs in one basket.” The separate fiduciaries can provide oversight and be a system of checks and balances to each other. It also reduces the burden placed on any individual person, as each fiduciary’s role is limited in scope. However, this approach will only work if there are several trusted candidates waiting in the wings. It can also be difficult for such people to coordinate with each other, adding a layer of administrative tedium.
Like anything else, it ultimately comes down to the individual circumstances of the client and their family, and their comfort level. Nevertheless, conversations like this often help to grease the gears and guide the client to their ultimate decision.