I had a friend who died and he,
On earth so loved and trusted me,
That ere he quit this earthly shore,
He made me his executor.
He tasked me through my natural life,
To guard the interests of his wife,
To see that everything was done,
Both for his daughter and his son.
I have his money to invest,
And though I try my level best,
To do that wisely, I’m advised,
My judgment oft is criticized.
His widow once so calm and meek,
Comes, hot with rage, three times a week,
And rails at me, because I must,
To keep my oath appear unjust.
His children hate the sight of me,
Although their friend I’ve tried to be,
And every relative declares,
I interfere with his affairs.
Now when I die I’ll never ask,
A friend to carry such a task,
I’ll spare him all such anguish sore,
And leave a hired executor.
Edgar A. Guest, Today and Tomorrow (Chicago: Reilly & Lee Company, 1942) (As published by White & Crouch, P.A.)
Ok, this poem is not exactly Shakespeare, but it conveys an important message. The appointment of an executor (or trustee or agent pursuant to a Power of Attorney) is a significant responsibility that may be flattering, but can be fraught with difficulty. Most people do not think of a “professional fiduciary” when considering the appointment of an executor for a Will, trustee for a Trust or even an agent for a Power of Attorney. People naturally think of relatives or maybe friends, but is that a good idea?
When considering who to appoint to oversee and administrate your Will, Trust or estate, a person naturally wants to choose someone who is considered trustworthy and familiar with one’s affairs (like family or friends). Trustworthiness is certainly a primary qualification, but there is much more to consider than familiarity. In fact familiarity can even be a stumbling block. The more one knows about another person and the beneficiaries of that person, the more difficult it can be to remain objective.
Of more primary importance in choosing a fiduciary is not only objectivity, but competence, reliability, knowledge, resources and understanding of the responsibility that comes with being a fiduciary. Perhaps, that even begs the question in your mind: what is a fiduciary?
A fiduciary, at the most basic level, is a person “invested with rights and powers to be exercised for the benefit of another person.” (Black’s Free Online Law Dictionary) More significantly, a fiduciary owes a “fiduciary duty” that is imposed by law. The fiduciary duty is the legal duty that is expected of a fiduciary when a person assumes a fiduciary role. The breach of that duty results in personal liability to the fiduciary.
Most people do not know what a fiduciary duty entails. A fiduciary duty is the highest duty imposed by law. It can be defined broadly as a duty of loyalty and care. Breaking down what that means underscores the significance and weight of the fiduciary duty.
The obligation of loyalty means that the fiduciary must carry out the expressed and implied direction of the person who made the appointment, and the fiduciary must put the benefit of the beneficiaries above the fiduciary’s’ own benefit. That raises an obvious issue for the fiduciary who is also a beneficiary. The fact that the duty is owed equally to all beneficiaries also raises an issue when the interests and desires of the beneficiaries are at odds with one other or with the expressed and implied direction of the document from the person making the appointment.
The duty of care is of equal import. Broadly stated, it requires a fiduciary to exercise the responsibilities in an informed, prudent manner, exercising at least the same level of care as the fiduciary would apply in the management of the fiduciary’s own affairs. Fiduciaries are expected to know the law, including duties imposed by the Trusts and Trustees Act (in Illinois or its equivalent in other states), including the Prudent Investor Rule, and many others. Fiduciaries must keep an accounting of everything the fiduciary does and be ready to provide the accounting when requested.
When considering the appointment of an executor, trustee or agent pursuant to a Power of Attorney, the responsibilities that go along with the appointment should not be under appreciated. The appointment can be seen as an imposition. Will your family member or friend be willing to take on the responsibility? Will they understand the weight of that responsibility? Are they capable of fulfilling the responsibility?
Aside from willingness, understanding and capability, one should also consider how the family member or friend will handle other family members who are suspicious, pushy, unappreciative, accusatory, over reaching and who may exhibit a host of other behaviors and attitudes that often worm their way to the surface when a loved one dies leaving money and other assets that others think they are entitled to. Family dynamics is a major consideration. Your appointment, though flattering, may be a land mine of difficulty for another family member or friend.
Professional fiduciaries will charge a fee, but most appointing documents allow the appointee to be compensated for the work, whether a professional fiduciary or not. If compensation is not allowed by the document, a person runs the risk that no one will be willing to undertake the responsibilities. Professional fiduciaries will be unaffected by the typical family controversies, rivalries and petty personal slights that have often festered for years and exposed in the vacuum left by the dearly departed. Professional fiduciaries are trained to keep their “eyes on the ball” and to focus on the things that the law requires of them when emotions and claims swirl.
Whenever an executor, trustee or agent appointment is being considered, give some thought to appointing a professional fiduciary instead of a family member or friend. At the very least, consider identifying a professional fiduciary as the last successor. In that way, if your individual appointees decide they cannot or do not want to handle the responsibility, you can be assured that someone will be there at the end of the line to do what needs to be done in a trustworthy, competent manner to carry out your instructions.