Do’s and Don’ts When Selecting a Fiduciary

[Editor’s Note: In the world of legal and financial issues, the fiduciary is a very important player. In general terms, a fiduciary is a person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets for the benefit of the other person rather than for his or her own profits.

According to the website Investopia.com, elderly people typically need a fiduciary to look after their assets on their behalf. The fiduciary is expected to act in the best interests of the person or persons whose assets they are in charge of. This is known as "fiduciary duty". A fiduciary is a crucial legal position that adult children taking care of their parents should understand.

In the following article, attorney William J. Brisk offers great advice on some does and don’ts when choosing a fiduciary.]

1. Don't torture yourself about whether, by naming one relative rather than another, you will hurt someone's feelings. If you're compelled to explain your choices (and you shouldn't be) simply tell those you choose not to name that you didn't want to burden them with the responsibility but you do appreciate their concern. 

2. Don't discriminate in your choices on the basis of gender or age. Relying on the eldest son has no more relevance to the selection of a fiduciary than it should to choosing princes -- as the British royal family example demonstrates. Gender and age don’t guarantee either competence or loyalty.   

3. Don't restrict your choices to close relatives. If none of your children is presently appropriate, consider other people to perform some of the tasks. 

4. Don’t name co-fiduciaries to serve simultaneously unless your affairs are very complicated or the Trust (such as a SNT) would function best with a division of labor. The advantages of dual appointments (contrasting talents and a "check" on an impulsive fiduciary) are usually outweighed by delays or impasses in decision-making. We usually counsel clients not to name Co-Agents, Co-Proxies, or Co-Executors. 

5. Don’t select a fiduciary whose interests may conflict with your own or with the interests of beneficiaries you name in an instrument.

On a more positive vein, the basic criteria you should apply can be boiled down to the ABCs, Availability, Background, Confidence, and Successor.

1. Select a fiduciary who is likely to be available when his or her powers are to be exercised.  The person should be young enough that she is likely to be around when you need her and willing to shoulder the burdens incumbent on the particular office for which she has been named. 

2. Select a person with the background to function as a fiduciary. In addition to being responsible and mature, any person you choose should understand the role he is to perform and appreciate your needs and desires. You may want your attorney to discuss your expectations with such candidates. 

3. Name a fiduciary in whom you have the utmost confidence. Honesty and loyalty are qualities which cannot be compromised in choosing a fiduciary. The ideal fiduciary has other attributes: personal organization, ability to deal effectively with lawyers and accountants, and general intelligence. Experience as a fiduciary may be valuable but is rarely required.

4. If at all possible, select at least one successor fiduciary for each position to replace the first person you named should that person become unavailable

Finally, by recognizing the very different roles fiduciaries play you may be able to match each role's particular characteristics with individuals in your own life who most inspire your confidence. 

This article is offered for informational purposes only and should not be construed as legal advice. Before executing any documents, you should seek advice a qualified attorney. Changes in the law and your personal circumstances may significantly alter the strategies recommended.