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Fiduciary Roles in Your Estate Plan in Illinois WHAT IS a FIDUCIARY ROLE?

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Fiduciary Roles in Your Estate Plan in Illinois WHAT IS a FIDUCIARY ROLE? FIDUCIARY ROLES IN YOUR ESTATE IN ILLINOIS PLAN “A “fiduciary” role refers to a position of trust, often involving money or property that has been entrusted to the individual in the fiduciary role.” CURTIS J. FORD ILLINOIS ATTORNEY A number of important decisions must be made when you create your estate plan. While many of these decisions relate to the disposition of estate assets should you become incapacitated or die, some of the most important decisions you will need to make have nothing to do with assets. Instead, those decisions involve fulfilling fiduciary roles in your estate plan. All too often individuals are chosen to fill fiduciary roles within an estate plan without giving adequate thought to the choices. A better understanding of the various fiduciary roles within your estate plan and the importance of choosing the right person for the job may prevent you from making this mistake. 2 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com WHAT IS A FIDUCIARY ROLE? A “fiduciary” role refers to a position of trust, often involving money or property that has been entrusted to the individual in the fiduciary role. A fiduciary must use the utmost care when handling money or assets entrusted to him or her because those assets are intended to be used for the benefit of a third party beneficiary. Furthermore, a fiduciary is expected to make prudent investment decisions and not take risks with assets unless specifically directed to do so by the person who appointed the fiduciary. In short, a fiduciary should be more careful with assets entrusted to his or her care than the fiduciary would be with his or her own assets. 3 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com WHAT FIDUCIARY ROLES EXIST IN AN ESTATE PLAN? Although each estate plan is as individual as the person who creates the plan, there are some commonly used estate planning tools and strategies. Therefore, there are also some common fiduciary roles within an estate plan, including: Executor –the Executor is the individual named in your Last Will and Testament to oversee the probate of your estate. Trustee – a Trustee is named when you create a trust agreement and is charged with overseeing the administration of the trust and management of trust assets. Agent (POA) –an Agent in a power of attorney is given the authority to act on your behalf in legal matters. Agent (Healthcare) –a healthcare Agent is give the legal authority to make decisions relating to medical treatment on your behalf should you become unable to make them yourself due to incapacity. Guardian – a Guardian takes over the care and maintenance of your minor children should you be unable to care for them yourself. WHY CHOOSING THE RIGHT FIDUCIARY IS SO IMPORTANT 4 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com People frequently make the mistake of appointing someone to a fiduciary role without giving the matter much thought. Often, a spouse, parent, or adult child is named to the position simply because they are the first person to come to mind. Choosing the wrong fiduciary, however, can dramatically impact your estate plan. In fact, the success or failure of your estate plan is often directly linked to the fiduciaries you chose when you created your plan. The Executor of your estate, for example, is charged with overseeing the probate of your estate. Numerous mistakes or errors can be made during the probate of an estate if your Executor does not have the experience and/or knowledge needed to successfully manage the probate process. For instance: Assets can be missed and left out altogether Claims against the estate could be paid without properly evaluating the claim to see if it is valid Assets could be sold for far less than they are worth Tax errors could be made, costing the estate a small fortune in penalties and fines Appointing the wrong person as Trustee of a trust agreement can have the same damaging effect. A trustee is responsible for administering the trust agreement and managing trust assets. 5 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com The list of duties and responsibilities a Trustee has is long and complex. If the right person for the job is not appointed, costly errors may occur, such as: Mismanaging trust assets Making unsound or risky investments with trust funds Neglecting or failing to maintain trust assets Making poor discretionary decisions Failing to properly calculate the trust’s tax obligations Whether an error is made by an Executor or Trustee, a single error can cause a well thought out estate plan to go awry, making it crucial to make wise fiduciary decisions when creating your estate plan. CHOOSING A FIDUCIARY During the creation of your estate plan you should take the time to sit down and carefully consider the fiduciary roles in your plan. Sometimes it does make sense to appoint a family member or close friend, but not always. In fact, sometimes appointing a professional is a better choice. This is often the case when appointing a Trustee for a trust agreement. An attorney or professional trust management company has the experience, skills, and time needed to properly manage a trust. If you prefer to keep 6 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com your fiduciary roles more personal, at least consider the following when making your decisions: Experience –has the individual ever acted as an Executor/Trustee/Agent/Guardian before? If not, has the individual acted in a similar role? Skills/knowledge –Some fiduciary positions require at least a basic knowledge of the law and/or finance. Does the individual have the requisite knowledge and skills? Availability –most fiduciary roles require a significant time commitment. Probate, for example, takes months if not years to complete. A Trustee commits for the life of the trust and a Guardian is locked in for the life of the child. Willingness –never assume that someone is willing to play a role in your estate plan – always discuss the position first before appointing someone to the position. Emotional factor –frequently overlooked, the emotional impact of your incapacity or death could make even a qualified family member or loved one a poor choice for a fiduciary role. Ultimately, you decide who to appoint or nominate for the various fiduciary roles in your estate plan. With a better understanding of the importance of those roles you will likely make better choices. Be sure, however, to discuss your options and choices with your Illinois estate planning attorney before finalizing any of your decisions. 7 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com REFERENCES Wealth Counsel, Understanding the Duties and Responsibilities of a Trustee Forbes, Understanding the Role and Responsibilities of an Executor Lorman, The Importance of a Fiduciary in Estate Planning Living Trust Network, How to Choose the Right Guardian for Your Children 8 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com About the Author Robert N. Nash Robert N. Nash is a partner in the law firm of Nash Nash Bean & Ford, LLP. The law firm has offices in Geneseo and Moline, Illinois and conference facilities available throughout Northwestern Illinois. Mr. Nash chose the estate and business planning arena because he believes it provides a positive force in his clients’ lives. He practices preventative, rather than remedial law. Robert Nash focuses on all aspects of estate planning, including estate, gift and income taxes, trust and probate administration, real estate, and business. Nash Nash Bean & Ford, LLP www.nashbeanford.com Geneseo Moline 445 US Highway 6 East 5030 38th Avenue, Suite 2 Geneseo, IL 61254 Moline, IL 61265 Phone: (309) 944-2188 Phone: (309) 762-9368 Fax: (309) 944-3960 Fax: (309) 944-3960 9 Fiduciary Roles in Your Estate Plan in Illinois www.nashbeanford.com .
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