Spotlight on Fiduciaries: What Are They And What Do They Do?
by Elizabeth Q. Boehmcke, Esq.
When clients walk into our office to discuss the preparation of an estate plan, they are frequently surprised by the number of fiduciaries that we ask them to name and are confused by the different functions each performs. In simple terms, a fiduciary is an agent who is supposed to act in the principal’s best interests and is charged with carrying out certain duties that may be imposed on them by law and by the terms of the document by which they are operating. Some fiduciaries operate during lifetime and others are only granted power upon the death of the principal. This article offers a brief explanation of some of the fiduciaries that may form a part of your estate plan.
Agent under a Financial Power of Attorney
An agent under a financial power of attorney is a person you name in your financial power of attorney to take care of your finances during your lifetime. A properly drafted power of attorney will address a broad spectrum of how to handle your financial affairs, including decisions about whether your agent can make gifts, whether your agent can create trusts for your benefit or for the benefit of others, and whether your agent can change your beneficiary designations, among other things.
A durable power of attorney means that the powers that you give to your agent survive your incapacity, but not your death. (Under Virginia law, a power of attorney is considered to be a durable power of attorney unless it specifically states otherwise.) Therefore, it is vital that the person that is named as your agent be a trustworthy and financially savvy individual because the agent may well be acting at a time when you are unable to police the agent’s behavior yourself. Your agent can be, but need not be, a family member. A trusted friend or financial advisor can be a wise choice in some circumstances – perhaps to be named as joint agents with a family member. It is also important to consider naming at least one successor agent to your named agent. In the event that your named agent is unable to act for any reason, including death, disability or simple disinclination, if no successor is named, it may become necessary for your family to apply to a court to appoint a conservator to manage your financial affairs. This can be very expensive, especially relative to the cost of preparing a well thought out power of attorney.
Agent under an Advance Medical Directive
An Advance Medical Directive is a document that incorporates a so-called “living will” with specific powers that your named agent can execute in connection with making medical decisions on your behalf when you are not able to make those decisions for yourself. Your medical agent is supposed to make decisions in accordance with your wishes as outlined in the living will section of the document and is given numerous powers in order to ensure that your wishes are carried out. An Advance Medical Directive can be used to either direct that life-prolonging procedures be used to the utmost or that they be withdrawn under certain circumstances. As with a financial power of attorney, it is important that your named agent be able to carry out your wishes and that you name at least one successor in the event that your first named agent is unable to act. Failure to have a medical agent under an Advance Medical Agent may result in a court proceeding to name a guardian for you to make those decisions.
An executor is the person you name in your Will to collect your probate assets, pay your funeral expenses, debts and other administrative costs from your probate estate, and then to distribute your assets in accordance with your wishes as expressed in your Will. Your executor has no power over your assets until the Will is probated and your executor qualifies before the Court. As with the agent you name in your durable power of attorney, your executor should be a trustworthy individual and, ideally, a person with the ability to keep careful track of receipts and expenses. In Virginia, the executor of a probate estate in excess of $25,000 must account to the appropriate Commissioner of Accounts for his/her administration of the estate. Once the assets are distributed out of the estate to the beneficiaries named in the Will, the executor’s job is complete. Naming a successor executor is a good idea in the event that your named executor is unable to act. Failure to name a successor will result in the Court appointing someone to act for the estate.
A trust can be created in a standalone document or in your Will. A trustee is the person named in your Will or your Trust document who invests the assets held by the Trust and then distributes the assets in accordance with the terms of the trust agreement. However, the trustee has no power over any assets until they are transferred into the trust. Depending on what sort of trust you have, assets can be transferred to the trust during your lifetime or at your death. Sometimes that transfer of assets is also called funding. If you have a lifetime trust and want the trustee of that trust to manage certain assets in the event of your disability (as opposed to having your agent under your power of attorney manage those assets), the trust must be funded with those assets during your lifetime.
Depending on how the trust is drafted, your trustee may have wide discretion in how the assets are invested and when and to whom distributions are to be made. Your trust may last a very long time, so it is important that the person you name to act as trustee is trustworthy, understands your objectives and concerns in creating the trust, and has sufficient sophistication to know when and how to get investment and/or legal advice if they cannot fully understand or manage the job alone. It may be important to you that you name successors to your trustee that you know or you may trust your named trustee sufficiently to allow them to name their own successor. In either event, it is important to discuss your trustee succession plan with your attorney so the proper trust provisions can be incorporated into the document creating the trust.
A guardian is a court appointed fiduciary who has only certain powers granted by statute and is charged with making living arrangements, care decisions, medical decisions and the like on behalf of their principal. A conservator is a court appointed fiduciary who has certain statutory powers to handle a principal’s finances. As alluded to above, a guardianship and/or conservatorship proceeding can be expensive and the need for it can be avoided with proper planning.
Ask Kit Kat – Famous Lab and More
Hook Law Center: Kit Kat, did a Labrador Retriever mix really attend a London movie premiere?
Kit Kat: Yes, in fact, one did! Woody, a Labrador Retriever mix, who belongs to British actor Tom Hardy, actually did attend the movie premiere in London of Legend in which Ford plays a set of twins. The thriller opens in the US on October 2. Ford had Woody decked out in a bow tie, and Woody grabbed a lot of the attention. You could say he even upstaged Hardy who had just announced that he and his wife are expecting their first child. Woody wanted to make sure he was in on the pictures that Hardy took with fans, so he kept jumping up on Hardy to be part of the action.
On another note, new research from the UK’s University of Lincoln sheds some light on the differences between cats and dogs. As one might expect, both species bond with their owners in close relationships, but the reason behind the bonding is different. Dogs tend to consider their owners as a source of security and safety in uncertain conditions or novel situations. Cats, on the other hand, don’t look to their owners to provide security, so they function more autonomously than dogs. So, not to say one species is better than the other—they’re just different. And that’s what keeps life interesting, wouldn’t you agree?(http://www.vetstreet.com/our-pet-experts/pet-scoop-tom-hardys-dog-steals-spotlight-at-premiere-obama-cuddles-idtarod-puppy…9/4/2015)
- October 8, 2015 – Andrew H. Hook and Shannon Laymon-Pecoraro will speak to caregivers with Home Instead Senior Services regarding Veterans Benefits.
- October 9, 2015 – Andrew H. Hook will be part of a panel discussion at the 2015 Art of Healthy Aging Forum & Expo on Friday, October 9, 2015, at the Virginia Beach Convention Center, 100 19th Street, Virginia Beach, VA 23451. The forum & expo runs from 9 a.m. – 2 p.m. Tickets are $15 until September 30th (limited seating). $25 at the door. To register for this event, please click registration.
- October 20, 2015 – ATTENTION PERSONAL INJURY ATTORNEYS: You are invited to attend a special 1/2 day conference at the Westin Hotel in Virginia Beach centering on ERISA subrogation, incapacitated adults and settlement trusts. Speakers will include Andrew H. Hook and Shannon Laymon-Pecoraro, attorneys from Hook Law Center, speaking on Incapacitated Adults and what you should know; Steve Lester and David Place from Synergy Settlements speaking on ERISA subrogation; and a panel discussion on settlement trusts to include James Creel from First Capital Surety & Trust Company. 3 CLE credits can be earning by attending this FREE seminar, “Elder Law Considerations for the Personal Injury Attorney.” Come learn about issues you, as a personal injury attorney, should be considering! Conference hours are 8am – 12:30pm and include a complimentary breakfast buffet at 8am. Registration is open until October 10, 2015. Register by calling 877.242.0022 and ask for Marci or 757.399.7506 and ask for Debbie. Space is limited so register TODAY!
- October 26, 2015 – Shannon Laymon-Pecoraro will be speaking at the National Business Institute’s seminar on The Probate Process from Start to Finish in Virginia Beach, Virginia.
Distribution of This Newsletter
Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at firstname.lastname@example.org or fax us at 757-397-1267.