There are some terms used in the estate planning realm that may be unfamiliar to many people. One of them is “fiduciary,” and we will demystify the term in this post.
Legal Responsibility
A fiduciary is someone who has a special legal responsibility to someone else, or multiple people. The fiduciary must put the interests of those individuals first, and they are legally bound to do so.
Executor of an Estate
One prime example of a fiduciary is the executor of an estate. If you use a will to make transfers at death, you would name an executor when you are creating the document.
A court-appointed personal representative would assume the role if no executor is named in a will, and this individual would also be a fiduciary.
An executor must serve the best interests of the beneficiaries, and the executor is compelled to make sure that the decedent’s wishes are carried out.
The executor would submit the will to the probate court, and the court would supervise the administration process. Creditors would be given an opportunity to come forward seeking payment, and all debts will be paid during probate. This would include final taxes.
All the assets that comprise the estate must be identified and prepared for distribution to the beneficiaries. This can involve appraisals and liquidation so it can take some time.
Ultimately, the executor will distribute the assets to the beneficiaries according to the wishes of the decedent.
Living Trust Trustee
A living trust can also be used to transfer assets at death and can be far superior to a simple will in a number of ways. If you have a revocable living trust, you will act as the trustee while you are alive and well so you would retain control and access to the assets.
You would name a successor trustee in the trust declaration, and this person would be a fiduciary. Any adult willing to assume the role can legally act as the trustee, and there are other entities that provide trustee services.
These other entities include trust companies, the trust departments of banks, and some attorneys and accountants. After the grantor of the trust passes, the trustee would have a fiduciary duty to the beneficiaries to administer the trust in their best interests.
Health Care Representative
Many people become unable to communicate their own health care decisions late in their lives. To account for this, your estate plan should include documents called advance directives for health care.
One of these directives is a durable power of attorney for health care or health care proxy. In this document, you name an agent who would be empowered to make medical decisions on your behalf if you are incapacitated.
Another advance directive that should be part of the plan is a living will. You state your life support utilization preferences in this directive, and you can add organ and tissue donation choices.
Attorney-in-Fact
Your plan should also include a durable power of attorney for property. The person that is named in a power of attorney to act on behalf of another is called the attorney-in-fact (or agent), and attorneys-in-fact are fiduciaries.
Powers of attorney are also used for various reasons outside of the field of estate planning.
For example, let’s say that you are going to be out of town during a real estate closing. You could name an attorney-in-fact in a limited power of attorney that gives the attorney-in-fact the ability to sign the paperwork on your behalf.
Schedule a Consultation Today!
We are ready to spring into action if you would like to work with an Ashland, Kentucky estate planning lawyer to put a plan in place. You can schedule a consultation appointment if you give us a call at 606-324-5516. The number for our Florence, KY office is 859-372-6655.
Our location in Charlotte, NC or Huntersville, NC can be reached at 704-944-3245, and you can use our contact form if you would like to send us a message.
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