A fiduciary is someone you put in a position of trust. In this post we focus on four types of fiduciaries that you name in your life plans and estate plan: Your agent under your durable power of attorney; your health care surrogate; your trustee under your revocable living trust; and your personal representative under your last will & testament. We describe the duties of each and tell you the legal restrictions you must consider when selecting someone for the job.
Before we go deeper, you should be aware that your fiduciaries should never be surprised to learn they are fiduciaries! That is not fair to them, nor does it give you the assurance they will be willing to serve when the time comes. Before you name a fiduciary in any of your documents, approach them to discuss the role’s responsibilities, answer any questions they have, and get their consent. You and your estate planning/elder law attorney should also discuss your possible choice of fiduciaries, taking into consideration the person’s qualifications, what tasks will be required, your relationship with the person, and that person’s relationship with others who may be involved, such as siblings.
In our practice, we find that choosing fiduciaries can be a challenge for clients. Use the guidelines below to narrow down your choices.
Agent Under Your Durable Power of Attorney
- Your durable power of attorney gives someone the authority to handle your financial affairs. In Florida, the durable power of attorney becomes effective as soon as it is signed, but in practice, agents will act only when the need arises. Obviously this means that the person you choose, as well as backups, must be people in whom you have total confidence and trust.
- Florida requires the person to be competent and at least 18 years old.
- Florida does not require your agent to be a blood relative, nor that the person reside in this state. Because more people now conduct their financial affairs online, where an agent lives has become less important.
- Professionals such as lawyers and accountants may also serve as your agent.
- Although there is no statutory prohibition against financial institutions serving as your agent, most will not do so.
- We recommend you present your Power of Attorney to your financial institutions for any asset you own individually, such as an IRA, before you become unable to act. This will make it easier for your agent to act on your behalf if and when it becomes necessary.
Agent Under Your Health Care Surrogate
- Your health care surrogate authorizes someone to make your health care decisions if you are unable to make them yourself.
- Unlike a durable power of attorney, under Florida law you may NOT name co-agents to serve simultaneously under your health care surrogate. You should, however, name back-up agents in the event that your original choice is unable or unwilling to serve.
- The person need not be a blood relative.
- The person need not reside in Florida. However, it can be advantageous for your health care surrogate to reside in state or even better, close by. That way, he/she can more easily assess your needs up close and consult with your health care providers in person.
- Because your health care decisions are deeply rooted in your personal values, you will want to talk in depth with your prospective health care surrogate before naming him/her. You will want to be sure they understand your desires and would feel comfortable carrying out your wishes – evenif your wishes do not align with their own values. You should keep your surrogate advised of any changes in your health and alert them if you are going in for surgery. You should also provide your surrogate with an updated list of prescription medications you take.
- Your surrogate and back-up surrogates should have a federal HIPAA privacy release.
- Our office provides clients with digital copies of their health care surrogate. We suggest that all designated surrogates, backup surrogates and anyone with a HIPAA release be given a digital copy. That way they can always access it should they need to make your medical decisions or obtain your medical information.
Personal Representative Under Your Last Will & Testament
- In your last will and testament, you will name a personal representative. (The personal representative in Florida is called an executor in other states.) This is the individual who will be responsible for carrying out the provisions of your will in coordination with the probate court. The duties of a personal representative are numerous and include safeguarding your probatable assets, identifying and notifying creditors and beneficiaries, providing reports to the court, distributing assets, etc.
- Your personal representative must be a Florida resident, or if not a Florida resident, must be a spouse or a blood relative.
- The person must be 18 or older and not have been convicted of a felony.
- Florida will permit a corporate trust company to serve, provided it is licensed to do business in Florida.
- You may name co-personal representatives. You should also name back-up personal representative in the event your original choice(s) cannot or will not serve. The same restrictions that apply to your first choice also apply to the backups.
- It can be helpful if your personal representative has some business savvy, but more important is that your choice possesses common sense, honesty, sufficient time to attend to the many necessary tasks, and the wisdom and humility to hire the right people if he/she needs help with the process.
Successor Trustee Under Your Living Trust
- Establishing a living (revocable) trust requires that you name a successor trustee. This is the individual (or individuals, if you have named co-trustees) who will take over management of your trust assets if you become disabled or when you pass away. The successor trustee does not have to report to the probate court. He/she will manage your assets, identify creditors and pay debts, provide accountings to beneficiaries, and ultimately distribute funds to beneficiaries of the trust. You should also name back-ups in the event that your first choice cannot or will not serve when the time comes.
- To serve as a trustee, a person must be 18 years old. It goes without saying the person must be someone you trust implicitly and who has scrupulous integrity.
- As with the personal representative under your will, it may be advantageous if the successor trustee has some financial acumen. However, the more important qualities are common sense and a desire to get the job done properly. Your successor trustee should call upon professionals such as attorneys, accountants, appraisers, real estate brokers, etc. to assist with various tasks.
- A corporate entity such as a trust department of a bank can serve as successor trustee, so long as it is licensed to do business in Florida. Also, a lawyer, an accountant or similar professional may serve as successor trustee. You should have a discussion with your proposed successor trustee about your expectations and needs. For example, you may want to discuss how your proposed successor trustee would handle distributing funds to a beneficiary with substance abuse issues. Usually, your individual personal broker cannot serve in this capacity. Of course, you can always designate a friend or a relative instead.
- Unlike the personal representative under a will, Florida does not require your successor trustee to be a resident of Florida. Nor must the person be a blood relative. Many Floridians have friends and family who live out of state who they wish to name, which is among the reasons many Florida residents choose a living trust over a will as their primary estate planning vehicle.
Revisit Your Fiduciary Choices Regularly and Update as Necessary
Once you select your fiduciaries, you are free to change them if necessary. In fact you should periodically review your choices to ensure your choices are in sync their current situation, and yours. We are frequently consulted by individuals whose named beneficiaries have passed away; become incapacitated; or who have become so busy with work, children, or caregiving that they cannot serve, although they previously agreed to take on the job.
You may also want to change your fiduciaries if your own values and circumstancess have changed with time. For example, your financial life may have become more complicated, making it advisable to name a trustee with greater financial experience. Or your wishes about the health care procedures you do or don’t want may have evolved, leading you to replace the person you previously named as your surrogate.
The estate planning lawyers of The Karp Law Firm are experienced at helping clients figure out who to name as their fiduciaries. Contact us at 561-625-1100 to schedule your estate planning consultation.
