Choosing a Fiduciary

Trustees who fail to comply with fiduciary duties give rise to a large amount of litigation. There are several different options when you’re choosing a fiduciary so if you choose wisely for your situation, hopefully, you can avoid litigation.

For health-care fiduciaries, some people name joint agents. This becomes a problem when there are only two joint agents and they disagree on something – there is no tiebreaker. A better way to handle this might be to name consecutive health-care fiduciaries.

For financial fiduciaries, many people name spouses. This many not be the best option for complex estates though. There are many ways that a spouse can get tripped up in managing complicated estates. Other options include professional advisors, corporate trustees, or private professional fiduciaries. Corporate trustees may not be a perfect fit for smaller estates because of the cost. Professional ficudiaries can be less expensive and are also easier to develop a personal relationship with.

Another way to avoid litigation is to provide for ways to remove and replace fiduciaries. Your documents can appoint a group of people who may remove or replace a fiduciary and specify replacement fiduciaries if one dies or steps down. If you can dictate specific instructions to account for all possibilities in your documents, then you or your survivors can avoid court determinations or litigation.

See Randy Gardner, Selecting and Maintaining Appropriate Fiduciaries in an Estate Plan, Journal of Financial Planning.

Special thanks to Jim Hillhouse (Professional Legal Marketing  (PLM, Inc.)) for bringing this article to my attention.