Stautz Law

Tag: POA

  • Pros and Cons of Different Fiduciary Choices

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    Hi folks, it’s Andy Stautz at Stautz Law. I am back talking about fiduciary choices. I just recorded a talk, but it got a little long and there’s more to talk about. So this is about the difference between corporate and personal or individual fiduciaries.  

    Two Types of Fiduciaries: Personal and Professional

    In my last video I mentioned that you want to think about the competence of your fiduciary, how they’re going to be doing emotionally, you know, kind of whom to choose. And I mentioned that one option is to use a bank or a trust company or an independent fiduciary and the other option is use a family member or friend.  

    Kind of two big categories. There might be more.  

    That’s what I think of. By far the two most common.  

    Advantages of Choosing Family Members as Fiduciaries

    So the advantage of a family or friend, just a personal fiduciary, is trust, right? You know them. It’s inexpensive and informal. I mentioned last time that you know, in probate cases, a lot of times a family member will “disclaim” — they will turn down the fee that they would ordinarily be entitled to. So that can be nice. You know, if someone just does it for you as a favor. Saves your heirs some money or saves your, you know, trust beneficiaries money. 

    Advantages of Choosing Professional Fiduciaries

    The other big option is corporate trustees. The advantages there are, you know, they’re good at it because they do it a lot. You know they’re going to cross their T’s and dot their i’s and you know they’re going to be independent. 

    That really helps with some of these behavioral trusts. You know, if you’re setting up a trust to protect a spendthrift from themself, you’ve got an addict or a gambling problem. If you name a family member or friend the trustee, they’re always going to be in conflict with the beneficiary, right? The beneficiary is always going to be going and saying… Wanting… putting pressure on the trustee.  

    A bank or trust company is going to have a much easier job of saying “no” and not harming existing relationships by being put in that role of standing between a trust beneficiary and the trust corpus.  

    Disadvantages of Personal Trustees and Executors

    Now the downside to family members, of course, is like I said, emotion. Personal relationships, you know. And also it’s a big ask emotionally. Practically you don’t necessarily know someone in your life who’s going to who’s in a good position to have the time, the expertise to administer a trust for you or to handle your estate.  

    Disadvantages of Professional Fiduciaries

    The disadvantage of corporate trustees or, you know, professional fiduciaries in general, is they’re going to be expensive, right? They’re not going to waive their fees. So that adds to the administrative cost of a trust. It adds to the expenses of an estate. You know, it can obviously be worth it. But that’s a consideration. 

    And some of these, trust companies and banks, there’s a minimum for them. Where they’re not going to administer a small, you know, grandchildren’s trust with $50,000 in it, right? It’s not worth their time. So below a certain threshold, you might not even be able to attract an independent professional fiduciary. You’ve got to be up into a certain level of assets and complexity for that to make sense.  

    Conclusion: Take Time to Think – It’s a Big Decision

    So those are kind of the considerations and like I concluded in my last video, you know it’s specific if it’s based on your goals. Whom you know, whom you trust, what you want to have happen. But it bears thinking about so. So do think about it before your initial planning meeting or after, because it’s an under-considered topic, I think, for most people, until they come in and say, Oh yeah. Big choice of whom to name.  

    Call me when you want to talk. I look forward to working through these problems and coming up with the best plan for you. Thanks and bye for now.

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  • Who Should Be Your Power of Attorney or Trustee?

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    Hi folks, it’s Andy Stautz at Stautz Law. I’m back with another talk about an estate planning topic. And this is another one of those overlooked things, in my opinion, and that is. Whom to choose for your fiduciaries. 

    What are “Fiduciaries” in Estate Planning?

    What do I mean by that? Well, as part of your estate plan, I’m always, in every case, going to recommend that you include a financial power of attorney. And an advanced directive for healthcare. And you’re also going to need in your will or in your revocable trust (any trust, really) you’re also going to need fiduciaries there.  

    So you need someone to be your power of attorney. That’s one fiduciary. You need someone to be your Health care representative. That’s another one. You need someone to be your personal representative. (You know, the executor in old language) of your estate if you’ve got a Will. You also need a successor trustee in the case of a revocable trust.  

    That’s a lot of different roles.  

    Key Point: You Can Choose Different People for Different Roles

    I think it’s important to point out that it doesn’t have to be the same person for all of them, right? You can choose one person and say, you know, this person really knows about my values, ethics. You know, regarding healthcare, they can be a great healthcare representative where they need to decide, you know life support or you know medical procedures. 

    But maybe they don’t have a financial mind or they’re not good with numbers and accounting. Well, it’s OK! You can have a healthcare representative who’s good at one thing, you can choose someone else to be a successor trustee or a financial power of attorney.  

    So that’s one big point: Choose your fiduciary or fiduciaries based on what they’re good at, right?  

    Being an Executor is Not an Honorary Position

    Which brings me to the second point. A fiduciary appointment is not an honorary position. I think people you know say, oh, you know. My spouse is the most important person in my life. I want her to be my executor. Or I want him to be my successor trustee. Or parents.  

    But here’s the thing: One: It’s a lot of work. It comes up all the time in estate administrations where at first a personal representative will say, oh, I don’t want the fee for my work on the estate as personal representative. And I say track your time anyway. And then months and months and months later, after doing all the work, it’s like, well, yeah, I do want the fee; that that was more work than I expected. So, you know, you gotta consider it is work.  

    Two: it requires certain skills which we touched on earlier. You know, if it’s a trustee role and there’s going to be accounting; an executor or personal representative role where you need to make an inventory and you need to get things appraised. You know you need to make sure you get the right skills.  

    And third is emotions. You know your executor acts when you are dead, so if it’s someone really close to you, they’re going through a lot emotionally. They’re going to be grieving you. And they might or might not want to have this extra administrative burden on top of their grief. It’s just not a good time to be asked to sort through all that.  

    Common Examples of Fiduciary Choices

    So. Those are kind of your big concerns. So the classic choice for lots of these fiduciaries is family members, and that’s great because you know, if you’ve got family members you that’s where the trust comes from. You know them; you trust them. That’s the most important thing. But like I said it it’s a big ask. It can be it can be heavy.  

    Your other option is an independent or corporate fiduciary. So you know banks have trust departments, they can do this for you. There are independent fiduciaries out there whose whose job it is to serve as a personal representative or successor trustee.  

    And I have heard from time to time of attorneys doing it for their clients. I don’t do that. I think there’s a an implicit conflict there. I won’t serve as a fiduciary for clients, where I’m also the one putting together the trust. But you could always go to a different attorney, maybe to see if they do that.  

    So that’s a big picture for you. You know, lots to think about, but you need to kind of balance all those considerations and the choice you make is going to be different for everybody. So I’ll probably return to this in another talk because there are a couple more things I didn’t get to, but this has been long already. Thanks for listening and I hope it helps you as you’re as you’re planning and give me a call when you’re ready to talk. Bye now.

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    Book your initial planning meeting with Stautz Law and we’ll discuss your individual needs. No obligation.

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