A fiduciary is a fancy legal term for the person who will take care of your property for you if you are unable to do it yourself, such as the executor of an estate, the trustee of a trust, or an attorney-in-fact under a power of attorney. Your first instinct might be to name one of your children as a fiduciary, but if you want to avoid conflict among your children, this might not be the best option.
Before choosing a fiduciary, think about the skill set required to perform that role. For example, executors may need to be business savvy if they are required to sell property and trustees may need to be financially savvy if they must direct investments. You also need to consider the burden that the job will put on the fiduciary.
It is important to be able to trust the individual named as fiduciary, which is why people often name family members as fiduciaries. However problems can arise when a parent with two or more children names one child as a fiduciary. A child may not be the best fiduciary for several reasons:
- It is hard for a child to be completely objective.
- Children often disagree over many things, including how long the estate should take to complete, the selling of assets, and the division of personal property.
- Children often don’t communicate with each other well.
- When one child is named as fiduciary problems between family members can arise surprisingly frequently.
An alternative is to hire a professional fiduciary. A professional fiduciary can be a bank with trust powers, a certified public accountant, or a trust company. The attorney who is drafting your estate planning documents can recommend a good one in your area. A professional fiduciary will charge a fee, but the fee should be explained ahead of time. In addition, because a professional is experienced in managing money and property, your assets are more likely to increase under this person’s or institution’s guidance.
To ensure that your family has some input, you can include a provision that allows one or more family members to discharge the fiduciary if they feel the professional is not doing a good job. This will allow your family to make sure the fiduciary is performing properly without having the burden of acting as fiduciary.