Choosing the Right Fiduciary: ‘Tis a Reason to be Folly

In Estate Planning by Coolidge Wall

“Where ignorance is bliss, ’tis folly to be wise.” This oft quoted line originates from Thomas Grey’s “Ode on a Distant Prospect at Eton College.”

In modern parlance, this line is bifurcated and inserted casually into playful conversation. The saying “ignorance is bliss” is most often associated with a state of being lethargic with one’s mind and yet fulfilled, nonetheless. A closer look at Mr. Grey’s poem suggests a theme that is less about reconciling one’s choices by resorting to apathy. Instead, it serves as a gentle reminder that acting wisely and with conviction in the present may serve to avoid an otherwise arduous path ahead. This analogy can be applied to any number of life decisions, but it is equally relevant to the selection of fiduciaries in your estate plan.

In the estate planning context, “fiduciary” is the general term used to describe the various persons you might name to serve as your representative. Fiduciary selection is crucial to the success of an estate and disability plan. Even a great plan can go awry if a fiduciary fails to observe his fiduciary duties or fails to follow the terms of the will or trust. The introduction of family dynamics only serves to upset the balance in what is often a difficult time.

Despite its magnitude, the fiduciary provisions of estate planning documents are typically given short shrift by estate planners and clients alike. It is easy for clients to become disenchanted by the endless pages of archaic prose, the various legal roles that fiduciaries play, and the assortment of names assigned to each role by different states. Selecting a proper fiduciary requires a basic familiarity with the names and functions required of each.

In Ohio, the more common fiduciary roles are:

Executor under a will. Your executor will be the individual(s) or entity responsible for gathering your assets following your death, managing and maintaining those assets, completing all the administrative and tax responsibilities of your estate, and distributing your assets according to your wishes. An executor can be responsible for these tasks anywhere from 6 to 24 months.

Agent (or “Attorney in Fact“) under a Financial Power of Attorney. Your agent will be the individual(s) responsible for handling your affairs, managing your assets, and making decisions on your behalf in the event that you’re not able or willing to.

Agent under a Health Care Power of Attorney. Your healthcare agent is authorized to make medical decisions on your behalf in the event you are no longer able to. Such powers also cover a wide range of specific actions that can be taken regarding an individual’s medical needs, such as approving medical treatments, determining incapacity, and electing to undergo additional tests or scans.

Trustee under a Trust Agreement. Your trustee(s) will be responsible for investing and managing the trust assets, distributing the assets in accordance with the terms of the trust, managing any family drama that may arise along the way, keeping accurate records, and filing all necessary tax returns.

Each of these roles requires an effective fiduciary to possess a particular set of skills, knowledge, and time. The common thread is that all fiduciaries hold positions of trust and allegiance to the principals who appoint them. The selection should be made after a thoughtful discussion that addresses the complexity of your estate and family dynamics. Unfortunately, it is all too easy to resort to choosing fiduciaries based on grounds such as age (“he or she is the oldest”), gender (“he is the man of the house”), proximity (“she lives closest to me”) or feelings (“I don’t want to hurt his feelings”). However, the more fruitful exercise is to evaluate each potential choice for its pros and cons under the circumstances at play.

To facilitate the decision-making process, commit yourself to the understanding that your fiduciary selection should be centered around your current situation. There is little benefit to be had by resorting to speculation of how things may be five or ten years down the road.

For example, your oldest daughter may be thriving in medical school, mature beyond her years, and get along well with her siblings, to boot. At first blush, she may seem like a perfect candidate to entrust with the responsibility of serving as Executor of your will or Trustee of the family trust. Unfortunately, medical students generally cannot attest to having a surplus of “free” time or flexibility with their schedules. Logistically, the administration of your estate will likely be more seamless if you consider another individual (or corporate fiduciary) for these roles now; you can (and should) revisit your plan in a few years to reevaluate the circumstances. If you feel strongly that your daughter’s involvement would facilitate continued family harmony, you might consider naming your daughter to serve alongside a corporate fiduciary as co-executor or co-trustee.

The appointment of a fiduciary in any capacity is a strong vote of confidence in that person’s judgment and trustworthiness. It is also a major responsibility. Of course, it is impractical (and in certain cases, undesirable) to expect that each fiduciary under an estate plan be an uninterested third party with a legal, financial, or accounting background. Instead, consider all potential candidates and then prioritize based on the following factors:

• Available and willing to serve

• High integrity

• Reliable, responsible, organized, responsive

• Common sense; ability to recognize personal strengths and weaknesses and ask questions if uncertain

The appointment of responsible and able fiduciaries is a crucial element in every estate plan. When undertaking these decisions, consider not only the qualification of the fiduciary, but also the consequences of making an uninformed choice. A driving force behind many estate plans is the shared desire to ensure continuity and peace of mind. A panel of properly vetted fiduciaries will ensure not only that your chosen beneficiaries feel respected and well served, but that your legacy will be carried on as you intended.

A wise choice, an informed choice, and a choice reflective of your ultimate intent will overcome any temporal bliss and ensure folly for you, and maybe even satisfaction for your beneficiaries. After all, Mr. Grey did say it best.

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