One of the biggest decisions we counsel people through when creating an Estate Plan is who will be responsible after you are gone. The nominated agents and trustees who act under the powers in your estate planning documents (Trust, Will, Power of Attorney, Advance Health Care Directive, etc.) are known as fiduciaries. This is a term that carries with it a specifically legal meaning. There are two parts of being a fiduciary that most aren’t aware of: (1) being a fiduciary carries personal legal liability if the job is done incorrectly, and (2) the role is not mandatory, so a named person may can decline to act or step down, leaving the next in line to act. With these in mind, let’s review the general options available for choosing fiduciaries:
Family and friends:
Pros: Least expensive, even when they do request fees. Sometimes already involved with the estate, so low effort required to collect and administer assets.
Cons: Estate Administration can be complex and confusing, and leaving this responsibility to someone ill-prepared can be a troubling situation to dump on their lap. Many of your friends and family are not ready for the job and/or do not want to take on the liability if it is done wrong. Luckily, they can decline to act if they don’t want the job.
Private Professional Fiduciaries
Pros: Available in California as a less expensive alternative to a Corporate or Bank Trustee. They are Certified, bonded, and are willing to work on almost anything you request. They are also efficient, since their job regularly entails administering estates.
Cons: They charge a fee, either hourly for services provided or a percent of assets under management.
Corporate and Bank Trustee
Pros: They have their own legal department, and will be an absolute stop against beneficiaries trying to get money earlier than you wanted.
Cons: Known to charge the highest fee of all as a percent of assets under management. Their legal department may be stubborn for any request that does not comply with their internal policy, which may be based on federal rather than California law.
We generally recommend listing out at least four fiduciaries for every role, and in the order of friends and family, then Private Professional Fiduciaries, and then (just in case) name one Corporate or Bank Trustee. This way each can consider whether they want to take the job or just decline to act, leaving the next more-expensive option available to take over if needed.