You have options on who to choose as your attorney-in-fact pursuant to a Power of Attorney, your Trustee under a Trust Agreement, or your Executor or Personal Representative pursuant to your Will. We will refer to these generally as Fiduciaries.

"THINK CAREFULLY BEFORE CHOOSING A FAMILY MEMBER OR FRIEND TO BE YOUR FIDUCIARY."

Many people will ask a family member or a friend to be their Fiduciary. A logical choice since Trust is essential in the relationship and these are people you know and trust. Furthermore, these friends and family fiduciaries may be willing to take on those responsibilities with little or no compensation and presumably care about you, your wishes, and the family/beneficiaries. If your affairs are simple, i.e., you have a couple of credit cards, a savings and checking account, some stock holdings in a single firm etc., the amount of work and knowledge about how to navigate the institutional waters to accomplish things will probably be relatively manageable by the family member or friend.

No two situations are alike and there several factors that can drastically complicate the administration of your affairs by a friend or family member. You should think about your situation before selecting a family member or friend for those responsibilities.

First, if you have a number of accounts to manage in various institutions, the paperwork can be onerous. Each institution tends to have their own forms which have been drafted by their lawyers. The forms are not always clear making it difficult and time consuming to fill them out. Because the forms are often hard to follow, they are frequently filled out incorrectly and rejected by the institution and the fiduciary will have to through yet another (or two or more rounds) just to get a transaction completed.

Many people call the institution’s Customer Service Representative for assistance in understanding what documents are needed and understanding how to fill out the documents. Apart from sometimes long wait times on hold, many of these customer service people really don’t know much more than you do and are often not very helpful (you rejoice when you find a Representative who knows what they are doing and can explain things to you so you can understand). Also some of the documents require a notary or a Bank Medallion signature (a process by which you have to bring all your documents to the bank for their review of your authority)—more time and paperwork.

Second, there are a number of legal documents with legal wording involved in all of this including, the Will, Trust, Power of Attorney, Probate Documents, Institutional Transfer and Distribution documents, and, in the case of a business you may own or operate a myriad of business-related contracts, governance documents etc. For most unaccustomed to these documents, these legal documents are difficult to understand and there will be times when you must engage an attorney, accountant etc. to interpret them and tell you what you can or should do.

Third, if there is a business involved, if the friend or family Fiduciary is not part or does not want to be part of the business or have the skills to run a business, the business suffers as does the Fiduciary who is over their head and burdened by trying to “run” the business. Similarly, if there are assets to be sold like a business, a house etc., people can be overwhelmed by trying to figure things out and getting it done.

Fourth, and in some cases most significantly, conflicts among the family members and/or beneficiaries are a problem for the family or friend Fiduciary. It is relatively common for family members to disagree over the way a trust and/or the estate is being handled and distribution matters. In addition, there can be disagreements, feuds, people not speaking to each other and other similar dysfunctional things which can impact, among other things, the administration of the trust or will, end of life decisions, and the estate and succession planning for a family business. A family member or friend trustee is put in the very uncomfortable position of trying to navigate these waters and do the right thing with all the competing voices and without causing even more familial upset including their own.

An independent fiduciary can objectively act unfettered by the same constraints that a family member or friend would have. In addition, it is also possible for the independent fiduciary to act as a mediator to try to obtain agreement, consensus and a better end of life for the person who made the trust or will.

Generally, one of the ultimate desires of the trust grantor or will maker is to not be a burden to their family at the end. It is understandable why such people believe that naming a family member who cares and knows all the interested parties will be the most effective (and probably least expensive way) to have things handled well. What isn’t factored into the equation is the sometimes tremendous time, effort, stress and emotional burden placed on the family fiduciary. The family member likely has sadness and grief issues around the situation to begin with. As a practical matter, the amount of time and effort required to administer a trust or estate can be significant, burdensome and daunting. Their responsibilities typically include— finding and collecting assets, paying off or settling debts and claims, closing accounts, and dealing with ancillary third parties (lawyers, CPAs, Investment Advisors etc) regarding taxes, legal issues including probate, financial investment decisions and the like. When the reality of all these things sets in, the family or friend may not have the time, experience or desire to wade through the myriad of financial and practical issues that may arise in the administration of a trust or will.

Ironically, separately or together, the factors described above can create a nightmare scenario for the family or friend Fiduciary. This massive burden on the family or friend Fiduciary is generally not what the person who passed ever intended and not what the family or friend expected when they agreed to take on the responsibilities.

So if one or more of those factors (complication, confusion, time and effort, grief, conflict) exist in your situation, you might engaging a trained independent professional do be your Fiduciary.

Law firms, Banks, Trust Companies often offer professional Fiduciary Services

Law firms, Banks and Trust Companies often have people or departments who you can hire as an independent fiduciary. Many people find their rates for these services are relatively high. Moreover, fiduciary work is generally not their core business. Their rates therefore tend to be high due to a number of factors including their overhead. The person servicing your account may or may not care about you as a person. You may or may not get the personal attention you want and deserve. Lawyers tend to know law but not business. Bankers tend to know banking and not law. And in these times, attrition rates at businesses mean that you are likely to get shuffled to another person who has the same infirmities and has to “get up to speed”—again costing more money.