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By E. Deane Kanaly
People often appoint fiduciaries and accept fiduciary roles as executors, trustees, guardians of minors, and corporate board directors without carefully considering all the personal, financial, legal and emotional ramifications. From my experience serving as a fiduciary and helping people determine their needs, I believe it’s good to seek professional counsel in identifying and naming fiduciaries, obtaining their acceptance, communicating your desires and intentions, and providing for contingencies by naming successors.
Donor Intent is Paramount In most states, anyone of legal age or a qualified institution can be a fiduciary. However, few have the time, resources, knowledge or experience to properly perform this serious legal and moral obligation. Dividing the fiduciary responsibility between a personal and professional appointment may be best. Trust officers and other professionals are uniquely qualified with the experience and education to represent financial affairs, while a family member or close friend is very useful from a “personal” standpoint. Unfortunately, instead of using “considered judgment” in naming a trustee or executor, many people only give last minute thought to fiduciaries. Here’s a short list of factors to consider when weighing individuals or institutions for appointment to fiduciary responsibilities: ·Experience – Does the person have the knowledge and ability to serve? ·Continuity – Will the person be part of your life in 10 or 20 years, or longer? ·Investment acumen – Does the person have the time and resources to manage money? Are they monitoring investments regularly and staying aware of changes that could affect funds? Can they handle your current and future assets? ·Objectivity – Can the person make decisions purely in the beneficiary’s best interest? ·Fair and equitable – Can the person exhibit fairness to all beneficiaries and comply with your wishes? ·Diligence and responsiveness – Will the person devote the time and resources to respond to fiduciary responsibilities when necessary? More than Managing Money Understanding fiduciary responsibility is key to properly managing affairs. There are many do’s and don’ts of personal financial and estate planning, all of which should be taken into consideration when selecting a fiduciary or accepting this responsibility. A fiduciary’s role is very broad. People are often called upon to make “God-like” decisions, such as providing trust funds for serious medical emergencies. Avoiding Conflicts of Interest Decisions must be made in the best interest of the beneficiaries, and within the framework of your intent. It is wise for parents to name a trustee for their minor children’s inherited estate, and a separate guardian of the child. A guardian may choose to spend the child’s trust fund in ways that were not intended. By naming a separate trustee, you also avoid putting the relationship with the child at risk by requiring the guardian to make all financial decisions. An independent trustee is called upon to make these decisions in the child’s best interest, while the guardian raises the child. Board of Director Considerations When asked to serve on the board of directors of a public company, it is an honor and yet carries serious responsibilities to corporate shareholders. You need look no further than the recent corporate debacles to understand how important board directors are to the best interest of shareholders. No matter what capacity a fiduciary serves in, they must be trusted and qualified to objectively perform their responsibilities. It is truly an awesome responsibility that one should neither accept nor bestow lightly.
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