Fiduciaries in Estate Planning Documents

A Fiduciary is a person who has been placed in a position of responsibility and authority over certain matters. A fiduciary in estate planning owes a duty to the person who benefit from that plan, be it in a will or power of attorney. The Number One Qualification For All Fiduciaries You Appoint Is Trustworthiness. In estate planning, there are several different fiduciaries: Executor (Will); Guardian (Over Minor Children, or Incapacitated or Disabled Adults); Trustee (Over Property); and Power of Attorney Agent (Over Health or Financial Areas). If you are designating any of these, please read over the short information on each and consult an attorney so that you can make as informed a decision as possible.

 EXECUTOR

It is the Executor’s duty to administer the Decedent’s Estate. This includes making sure that the probate process is properly completed, making sure that the Decedent’s final federal individual income tax return is filed and the income taxes paid, making sure that all debts owed by the Decedent are paid and that all claims against the Decedent (or his Estate) are handled, keeping the Decedent’s assets safe and properly invested during the estate administration period, handling any lawsuits and title disputes involving the Decedent, his Estate or his assets, filing a federal estate tax return and a Texas Inheritance Tax return, if required for the Decedent’s Estate, and paying any federal estate and Texas inheritance taxes due, filing federal income tax returns for the Decedent’s Estate during the administration period ( and a final Estate income tax return when the Estate is closed), making partial distributions of the Estate to the beneficiaries during the administration period, closing the Estate when all of the administration matters have been completely finished, and then distributing the Estate to the beneficiaries according to the terms of the Decedent’s Will. If trusts are created in the Decedent’s Will, it is the Executor’s duty to set up the trusts and to fund them properly. At that point, the Trustee takes over the administration of the trust(s). You may appoint Co-Executors to act (no more than three (3) at one time – even two (2) can be impractical sometimes). If you appoint a Sole Executor, you should also designate one (1) or two (2) alternate Executors.

TRUSTEE.

The Trustee’s primary duty is to administer the trust created by the Trustor/Testator in accordance with its terms (and applicable trust law). The Trustee must make sure that at all times the trust assets are invested prudently (considering both the production of income and safety and growth of principal and related tax objectives), that the trust assets are protected from loss (e.g. appropriate insurance is maintained where applicable), that good records of all transactions involving the trust are kept (e.g., receipts and disbursements), that distributions are made to the trust beneficiaries as directed by the trust instrument, that federal income tax returns for the trust are filed each year, and that any other matter involving the trust is properly considered and handled. When the trust terminates (by its terms), the Trustee must distribute the trust assets to the proper beneficiaries, according to the terms of the trust (the distribution might even be to the Trustee of yet another trust), and a final federal income tax return for the trust must be filed. It is not unusual to have Co-Trustees (no more than three (3) at one time) or a single Trustee, followed by one (1) or two (2) successor Trustees. Obviously having just one (1) fiduciary act is simpler and more practical; however, sometimes having two (2) or more provides checks and balances.

GUARDIAN OF THE PERSON

The Guardian of the person acts on behalf of a minor (person under age 18) or incapacitated person (of any age). The Guardian of a minor is usually the person with whom the minor will live. Generally, parents appointing a Guardian for their minor child should try to select someone who will raise their child in a manner similar to what they themselves would have done. The Guardian is responsible for seeing to it that the minor is properly educated and trained in a manner that will lead to a productive life. The Guardian is also responsible for the moral upbringing of the minor child. The Guardian may handle some money belonging to the minor, such as a monthly distribution check received from the Trustee administering a trust for the benefit of the child, but the bulk of the child’s estate is handled by the Trustee. The Guardian does have a duty to keep records, in general, of what has been expended on behalf of the child. Co-Guardians may be appointed, but they must be husband and wife.

 POWER OF ATTORNEY

A Power of Attorney is inexpensive way to handle transactions for the incapacitated person and/or for someone who is frequently out of town or is simply unable to get around as much. There are two types – one deals with medical issues and the other deals with financial issues. You should choose an agent that is available to you and your property and that you trust. For example, if you have several children to choose from, ask yourself these questions: 1) do they live near you, 2) are they responsible, 3) do you trust them to make appropriate decisions for you, whether financial or medical? Talk to the persons you are considering appointing and find out their feelings. You should only appoint someone who you have absolute confidence in with all of these areas. And remember, a power of attorney can be changed or revoked so long as you are competent to do so.