How to Choose Your Fiduciaries
HOW TO PICK YOUR ESTATE PLANNING FIDUCIARIES
You should keep the “power of temptation” in mind when you are selecting the people who will be in charge of your affairs if you are incapacitated or no longer living.
Financial Powers of Attorney
Your attorney-in-fact will make financial decisions for you if you lose your ability to think and reason for yourself. Your attorney-in-fact will be in charge of selling your home, investing your money and paying your care costs. It is not unusual when I am meeting with a client for estate planning to have my client suggest an adult child as a good candidate to serve as the client’s attorney-in-fact, and in doing so, proudly tell me, he or she is very bright because he or she is a doctor or maybe a lawyer or a college professor, etc. My counsel to my client is “intellectual brilliance” is not the most important quality in an attorney-in-fact.
When you are sorting through the people closest to you for the right person to serve as your financial attorney-in-fact, the most important question, in my experience, is “Who has made the most responsible decisions in their own financial life?” We all know brilliant people who have made a muddle of their finances.
The question that gets to the heart of the matter is”: “Does the person you are suggesting as your attorney-in-fact spend a little more or a little less than they make each month?” If your attorney-in-fact is always a little “short” each month, they may well be tempted to “borrow” from the money they are managing as your attorney-in-fact to help themselves out of a crisis. People who do not manage their own money very well can be extremely honest and big-hearted, but “borrow” from you with the full – but totally unrealistic – intention of paying your account back next month.
If you name such a person as your attorney-in-fact, you not only put yourself at risk but you put your loved one at risk of criminal prosecution if the “borrowing” comes to light. There are a number of recent examples of fiduciaries getting into serious legal trouble and even going to jail when they have “borrowed” funds that they are supposed to be managing as an attorney-in-fact.
If you have the good fortune of having two reliable candidates to be your attorneys-in-fact, consider making them co-attorneys-in-fact. That way, if one is tempted to get off the path of a good fiduciary, the other can pull them back on track.
Health Care Durable Power of Attorney
When I am helping clients think through their health care power of attorney selection process, I ask my client to think about, “Who cares about you the most, who understands you and the way you see things the best and who will be there asking the doctor the right questions if you are unable to think and talk for yourself?”
When my clients are picking a health care attorney-in-fact, I recommend they only name one person to serve because in a crisis, it is important to make things as easy for the doctor as possible. Things will flow more smoothly if the doctor does not have to call together a committee for a decision.
Personal Representative (also known as “Executor”)
The third fiduciary you need to select when you are doing your estate planning is your personal representative. This is the person who will see that what you say in your will gets carried out. Here is an opportunity to smooth the feathers of any family dynamics which may have been ruffled by your other choices. Being the oldest child of a large family, I can confess that oldest children often see themselves in the “in charge” role they had when they and their siblings were young. That attitude often continues into adulthood. However, if your oldest child will not make a good attorney-in-fact for the reasons discussed above, then you may want to consider naming him or her to serve as your executor or co-executor. The reason is that since a will is probated, your personal representative will be supervised by the judge and so cannot easily get too far off track. In contrast, your attorney-in-fact does his job with no direct official supervision.
Another option to consider if you have a blended family and you are leaving one-half of your estate to your children and one-half of your estate to your spouse’s children, is to name a child from each set of children as co-executors to keep both sides of the family in the information loop during the probate. Co-personal representatives in such a situation can make things go much more smoothly later. Also with all fiduciary choices, you should name alternate fiduciaries to serve if your first choice cannot serve.
Picking good fiduciaries is an important part of estate planning. Your lawyer knows the fiduciary job descriptions. You know the strengths and weaknesses of your family. Part of getting well-designed estate planning documents is working as a team with your attorney to make the best fiduciary choices for you, in light of your individual family situation.
Elizabeth A. Perry, a member of the National Academy of Elder Law Attorneys, has been helping Clark County residents with their estate planning needs for over 20 years. Her practice emphasizes wills, trusts, probate and Medicaid planning. You are invited to call her to schedule an appointment or sign up for a class at (360) 816-2485.
(The above should not be construed as specific legal advice and is intended for general information purposes only)