Clients often give detailed thought to their plans and know down to the last bauble to whom things should go. But, then they choose their fiduciary (trustee or executor) seemingly with little thought to the role in which they would serve. Clients gloss over the importance of the fiduciary. But, estate planning attorneys know that a fiduciary is really the keystone to an estate plan. The person selected as executor or trustee is critical to the success of the plan. Here are some potential mistakes that a fiduciary could make:
- Paying off creditors’ claims as soon as they come in, leaving insufficient assets to pay claims of a higher priority.
- Failing to collect and protect assets
- Failing to invest assets appropriately
- Failing to exercise discretionary appropriately
- Failing to make appropriate filings, such as tax returns
Many of the above mistakes may be avoided if the fiduciary simply hires an experienced estate planning attorney to guide them. Without proper guidance, many fiduciaries might make some of these mistakes.
But, other mistakes may happen due to the inability of the fiduciary to exercise and carry out sound judgment. For example, can the trustee stand up to a beneficiary who wants distributions that may not be in the beneficiary’s best interests, like a teenage beneficiary who wants an expensive sports car?
Family relationships also should be considered. Will naming one sibling as the trustee of another sibling’s trust drive a wedge between them at the time it’s most important for them to be there for each other, i.e., at their parents’ deaths?
The estate planning attorney can discuss what makes a good fiduciary:
- Integrity
- Willing to bring in outside experts (like an estate planning attorney, accountant, etc.)
- Good organizational skills
- Good relationships with others, such as beneficiaries
- Reasonable intelligence
With guidance from the estate planning attorney, the client can choose the most appropriate fiduciary, who may or may not be the oldest child. In fact, in some circumstances, when there is not a good choice from among the family, it may be a corporate fiduciary or other choice from outside the family.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com
Steve Hartnett
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