Who Are the Fiduciaries in Your Estate Plan? (and What That Means)
When you create an estate plan, you name individuals to act on your behalf and for your benefit, as well as implement your wishes, if you become incapacitated or pass away. The people you designate for those responsibilities are fiduciaries. Under Georgia law, they owe a fiduciary duty to you and, in some cases, to the beneficiaries of your estate. But exactly what does that mean?
What Is a Fiduciary?
A fiduciary holds a position that requires the person to act within high legal and ethical standards in performing the responsibilities of the position. If the person violates the required standards, a legal action for breach of fiduciary duty may occur, subjecting the person to legal liability.
Generally, a fiduciary duty exists when one person places confidence and trust in another person to act on their behalf with regard to a particular matter or in financial affairs generally. Fiduciary responsibilities exist for specific types of relationships under Georgia law, including these individuals designated in your estate plan:
- The executor of your estate, appointed in your Last Will and Testament
- The trustee appointed to manage and administer a trust
- Your financial agent under a durable financial power of attorney
- Your health care agent under an advance directive for health care
Each of these individuals has a fiduciary duty to perform their responsibilities according to some of the highest legal and ethical standards that exist by law.
The Executor of Your Estate
When you make a Will, you designate the executor of your estate. After your death, the executor has responsibility for implementing all the terms in your Will. That may include making your final arrangements (unless you name another person to have that responsibility), gathering and protecting your assets and property, probating the estate (if required), and distributing your property according to your Will.
The duties of an executor are significant and substantial. To learn more about the specific duties — including the executor’s fiduciary responsibilities — you may read our recent blog post discussing the executor’s role in your estate.
The nature of your executor’s responsibilities makes it essential for you to select a person for that position who can perform all the required duties. You must have absolute trust in your executor and in their ability to fulfill the role. When you discuss your Will with your estate planning attorney, your lawyer helps you work through the process of choosing your executor, taking all the important qualities into account.
The Trustee Appointed in a Trust
Many estate plans include a trust. In the trust document, you designate the trustee to manage and administer the trust and distribute the assets to the beneficiaries according to the terms of the trust. Often, you also name a successor trustee to serve in the event the original trustee is unable (or unwilling) to serve.
Trustees and successor trustees must be able to handle the financial management aspects of trust management. Those duties often require making investment and distribution decisions. The trustee also handles communication with the beneficiaries. Under Georgia law, trustees have many specific legal responsibilities and owe a fiduciary duty to the beneficiaries of the trust.
Selecting a trustee and successor trustee requires great care, because of the fiduciary duty owed to beneficiaries and the financial ability required to manage and distribute trust assets. Your estate planning attorney works closely with you to ensure that the trustee you select is worthy of the significant responsibilities of the position.
The Financial Agent Under a Durable Financial Power of Attorney
A durable financial power of attorney is one of the documents in your estate plan. In this document, you name a person to act as your financial agent if you become incapacitated, temporarily or permanently. In that event, the agent pays your bills, manages your bank accounts and other financial accounts, and handles all the aspects of your financial affairs that you normally take care of yourself.
Your agent owes you a fiduciary duty in exercising the authority given under your durable power of attorney for financial matters. You must appoint a trustworthy person who has the skill and ability to perform the tasks necessary to manage your finances.
The Health Care Agent in an Advance Directive For Health Care
In your advance directive for health care, you designate a health care agent to make health care decisions on your behalf if you become incapacitated and are unable to make those decisions. Based on the terms in your advance directive, your agent may make decisions about medication, surgery, and other matters relating to your medical care, as well as your personal care. In making those decisions, your agent must abide by the wishes you express in your advance directive and owes you a fiduciary duty in carrying out the responsibilities you assign to the agent in the document.
A health care agent does not have financial responsibilities. A durable power of attorney for finances is the only way to authorize someone to handle your finances in the event of incapacity. Even so, your health care agent must be a person that you trust to understand and implement your wishes about personal and health care matters, if you become unable to make those decisions for yourself.
How to Choose the Fiduciaries in Your Estate Plan
Given the extraordinary responsibilities of all the fiduciaries in your estate plan, it is essential that you carefully select each individual. In some cases, one person may be able to fill several different roles. In other cases, it may be better for different people to be designated for the separate roles.
When you create an estate plan, your attorney works closely with you to identify each person to fill the fiduciary roles in your plan. Your lawyer explains the responsibilities of each position and helps you navigate throughout the entire process.
Fiduciary selection is another extremely important reason that you should never attempt to create an estate plan or sign any estate documents without the assistance of an experienced estate planning lawyer. To learn more about the risks of using forms or online services for estate planning, please read our article, How Do-It-Yourself / DIY Wills Create Substantial Risks.
Talk With a Trusted Georgia Estate Planning Attorney
In our Cartersville estate planning practice at Asset Protection & Elder Law of Georgia, we assist clients with all aspects of creating and maintaining an estate plan, including selection of all fiduciaries designated in plan documents. We provide services to clients throughout the communities northwest of Atlanta, including in Bartow County, Cobb County, Cherokee County, Gordon County, Floyd County, and Paulding County. Call us at (770) 382-0984 or contact us through our online form.