At its best, estate planning addresses goals related to both our own well-being as we age, and the designation of assets–be they modest or many–for beneficiaries. The ultimate success of estate plans rests with the fiduciaries named to carry them out. Read on for an overview of fiduciary roles and essential duties.
Understanding Fiduciary Roles and Duties
Although one trusted person or institution might serve as fiduciary for various aspects of an estate plan, it’s quite possible to have more than one fiduciary, depending on circumstances and the details of an estate plan. No matter the specifics, however, every fiduciary is obligated to act in the best interest of the estate and its beneficiaries:
A fiduciary is someone you appoint to manage and oversee some aspect of your estate, acting in the best interests of your beneficiaries. Fiduciaries can take on various roles, including executors of wills, trustees of trusts, and agents under powers of attorney for healthcare and financial matters….The cornerstone of a fiduciary relationship is trust. Fiduciaries hold a legal and ethical obligation to act in your and your beneficiaries’ best interests, managing your affairs with diligence and loyalty….Fiduciaries must always prioritize the beneficiaries’ interests, avoiding conflicts of interest and managing the estate efficiently and effectively….This involves prudent investment, accurate record-keeping, and transparent communication with beneficiaries. Fiduciaries are accountable for their decisions and actions concerning the estate….Fiduciaries must adhere to all legal requirements, including tax obligations and reporting standards. They should also respect the ethical standards of their role, maintaining confidentiality and integrity.
The specific names and tasks assigned to fiduciaries depends on both location and specifics in the estate plan. For example, when there is a will, typically the fiduciary is referred to as an executor, and given responsibility for “administering your estate as outlined in your will. Their duties include paying debts and taxes, distributing assets to beneficiaries, and ensuring your estate is settled according to your wishes.” Note that in some states, the executor of a will is referred to as a personal representative.
Given their usefulness in addressing a variety of goals, trusts are increasingly anchoring estate plans. When trusts are established, trustees are designated in the fiduciary role:
“Trustees manage assets held in a trust. They handle the distribution of these assets to beneficiaries according to the terms you set in the trust document. Trustees play a critical role, especially in managing long-term assets or when beneficiaries are minors or have special needs.”
Another important aspect of estate planning is designating a power of attorney who can “make decisions on your behalf, typically concerning financial matters or healthcare, should you become incapacitated.” Clearly, the duties that the various fiduciaries involved in an estate plan must be prepared to take on must be taken seriously and properly accomplished. For an estate plan to succeed, it’s essential to choose the fiduciaries wisely, and have clear conversations about your intentions, and plans, as well as the time commitment involved. Here are five pointers to consider related to the designation of all fiduciaries:
- When selecting fiduciaries, assess their trustworthiness, reliability, and ability to handle the responsibilities. It’s not just about choosing someone close to you; they must also have the requisite skills and temperament.
- In some cases, appointing co-fiduciaries can be beneficial, allowing for checks and balances. However, this can also lead to conflicts if the fiduciaries do not work well together.
- Estates with diverse or extensive assets, debts, or complicated family structures can pose significant challenges, requiring sophisticated management skills.
- Fiduciaries often have to handle sensitive family dynamics, especially in cases of dispute among beneficiaries or differing interpretations of the estate plan.
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Staying abreast of changes in laws and regulations that affect estate administration is crucial for fiduciaries to ensure compliance and optimal management of the estate.
Understanding Fiduciary Bonds
Because of the significant responsibilities involved in serving as a fiduciary, a type of bond, sometimes referred to as a fiduciary bond, is frequently required. Depending on the specific responsibilities to be undertaken by the fiduciary, the bond may alternatively be referred to as a conservator, guardian, trustee, personal representative, executor or estate bond. Essentially, every type of fiduciary bond serves as a guarantee that duties will be carried out in accordance with the law and in the best interests of beneficiaries. Colonial Surety makes it easy and speedy for fiduciaries in every state of the country to obtain their bonds: simply: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.
Obtain Digital Fiduciary Bonds HERE
Good To Know: Professional Fiduciaries?
There are many trends today that may make it sensible to appoint a professional fiduciary. Aging solo, special needs, friends and loved ones stretched out around the country and world, shifting family structures—all these are examples of how even with a plethora of relatives and friends who could serve as fiduciaries, it can be reassuring to designate a professional. Legally bound by duties like loyalty and prudence, professional fiduciaries are obligated to demonstrate a high standard of care in carrying out their responsibilities.Though often lawyers, professional fiduciaries can also be accountants or other financial professionals or even a bank or trust company. Essentially, a professional fiduciary is bound by the requirements of fiduciary duty to “prioritize the interests of the beneficiary over their own,” as they carry out their responsibilities.
Services for Estate Planning Attorneys
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Founded in 1930, Colonial Surety Company is a direct writer of surety bonds and insurance products. Colonial is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed for business everywhere in the USA.