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Elder Care Finances – Who to Select as Fiduciary

One of the most difficult decisions you’ll make when creating your estate plan is who to name as your executor, your trustee, and agents under your advance medical directive and power of attorney. You may think the answer is obvious – your spouse, followed by your oldest child or all of your children, perhaps. To really make a good selection, however, it’s important that you understand the responsibilities that come with each of these fiduciary positions and whether the individuals named are capable of and willing to serve in each capacity.

An executor is the individual, corporation or trust company named in your last will and testament to wrap up your affairs, pay any final debts, and distribute your estate in accordance with your wishes. This person’s responsibilities begin after you pass away and upon their qualification in circuit court.

Depending on the assets passing through your will, this person may be required to file an inventory listing all of the assets of the probate estate, as well as annual accountings until the estate administration is complete. There are several steps that must be taken in the administration of a probate estate, and we find that in many cases, this process takes about a year to complete.

A trustee performs many of the same tasks an executor does, in accordance with the terms of a trust agreement. A trust may be created under a will or as a separate document. If the trust is created under a will, the trustee will generally need to report to a commissioner of accounts throughout the administration of the trust. However, if the trust is created in a separate document, there is generally no requirement that the trustee be overseen by a commissioner of accounts. The trustee must administer the trust in accordance with the provisions of the trust agreement, and, like an executor, has fiduciary duties toward the beneficiaries. The trustee must provide accountings to the beneficiaries at least annually and keep them reasonably informed about the administration of the trust.

Executors and trustees are often tasked with gathering all estate or trust assets and ensuring they are properly titled, opening estate or trust financial accounts (checking and investment accounts, for example), paying bills and administrative expenses, and distributing assets in accordance with the provisions of the will or trust. In the case of a trust that continues for the benefit of a beneficiary or beneficiaries, the trustee may have continuing obligations for several years.

An agent under a power of attorney is an individual, corporation or trust company you name to assist you with your financial affairs. This person may have the authority to assist you immediately upon your signing of the power of attorney, or only at your incapacity, depending on the terms of the document. A power of attorney generally gives the agent the ability to assist you with just about anything you could do yourself, including write checks, pay bills, buy and sell property, and maintain investments and insurance policies. The agent’s authority ends upon your death.

Because your executor, trustee, and agent under your power of attorney all have access to financial accounts and assets, it is of extreme importance that the individuals you name be fiscally responsible, trustworthy individuals. If your spouse or children have problems with spending too much money, gambling, addiction, or any other issues that might not make them the best individuals to handle your financial affairs, consider naming a trusted friend, a corporation, or a trust company. You should also consider the location of the individuals you are naming – if you appoint someone in California as your executor, be aware that he or she will need to fly to Virginia and qualify in court as the executor. An out-of-state executor will also be required to pay a bond, regardless of any provision in your will to the contrary.

An agent under an advance medical directive is different, however – this is the individual or individuals you name to make medical decisions on your behalf in the event of your inability to do so. Under Virginia law, this person may only serve once your attending physician and another licensed physician or qualified clinical psychologist have declared you unable to make your own decisions. Although it is not necessary that this individual be financially savvy, it is important that you select someone who understands your wishes and will ensure they are followed in the event of your incapacity. You should also consider naming an individual who will be emotionally capable of making difficult decisions in such a situation.

Before selecting individuals to serve in each of these positions, consider their skills and abilities (can they handle this responsibility and will they do a good job?), their availability (will they have time to serve?), their location (will distance affect their performance?), and any family dynamics that may affect the individual’s service (does this individual get along with the rest of your family?). If no one in your family would be a good selection, or your family members do not get along, a corporation or trust company may be a good fit for you.

Special Contribution by

Portrait of Bill Fralin
Posted on
October 5, 2016
Capital City Nurses