Fiduciary refers to an individual or entity with a legal obligation to another party. We will explain why fiduciaries are so important in estate planning.
The Executor of an Estate
You can use a simple will for your last wishes. However, you must name someone to handle the administration of your estate after you’re gone. This person is called the executor. A fiduciary is the executor of an estate.
They have the legal responsibility of serving the best interests of the beneficiaries who will receive inheritances.
You should consider the tasks required when choosing an executor. This is not a title you give someone to show your love and respect.
In order to admit the will to probate, the executor must follow all laws in the state. Notification must be given to creditors about the death of the decedent. They are allowed time to seek satisfaction.
All remaining debts, including taxes, must be paid by the court while the estate is being administered. The executor will inventory and identify the assets of the estate and prepare them for distribution to the beneficiaries.
This is a large responsibility and can take up to a lot of time depending on the estate’s size. To ensure that the person you choose to name is ready, willing, and able to take on the role, it is important to discuss these details with them.
Living Trust Trustee
A living trust can be a great alternative for a will. It is an asset transfer vehicle that can be used to transfer assets. One reason is probate avoidance.
If you have a living trust you would be the trustee while you’re alive and you would nominate a successor to take over the role after you die. The trustee would act as a fiduciary and would have legal responsibility for the beneficiaries.
The trustee will distribute your assets to beneficiaries without probate after you die. This is an expensive and time-consuming process. The records are also available to the public so privacy is compromised.
Health Care Representative
You should plan your estate to address the possible outcomes that may arise at the end of your life. You should include in your estate plan advance directives for healthcare. One of these is a durable power of attorney for health care.
The “durable” designation allows for the power of attorneys to continue in effect even if you become incapacitated. The document would name an agent, who would be empowered to make decisions for you regarding medical matters if you are unable to do so yourself.
A living will is another important advance directive that should be included in the plan. This type of will allows you to state your preferences regarding life-sustaining measures such as feeding tubes, artificial respiration, and resuscitation.
Lawyers
Fiduciaries are all attorneys. This applies to all areas. Lawyers have to act in the best interest of their clients. They cannot prioritize their own interests.
Attorney-in-fact
An attorney-in-fact is a person who is authorized to act for another person in a power-of-attorney. This is another type of fiduciary. A durable power of attorney for your property is required to designate someone to manage your finances.
If you have a living trust, you can designate a disability trustee as your administrator to manage your affairs in the event you become incapacitated.
Other than estate planning, powers of attorney can be used.
You might give someone power of attorney to sign a contract for you if you’re not in the country. It would be a limited power, and they would only have the right to represent you.
This article was written by Alla Tenina. Alla is a top trust attorney in Orange County California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.
