How to vet a fiduciary. By Austin Estate Planning Attorney Zachary D Kamykowski

Questions to ask when hiring a fiduciary

Deciding on a fiduciary, or decision-maker, often serves as a key roadblock to creating an estate plan. This post provides some guidelines I, as an estate planning attorney in Austin, recommend you ask when choosing a fiduciary. A comprehensive estate plan consists of several documents that accomplish three critical things. First, they lay out your wishes for handling your money and property during life and at death. Second, they explain your medical wishes if you can no longer make them yourself or communicate them to others. Third, they list the trusted individuals you want to carry out your financial and medical wishes.

For some people, choosing trusted decision-makers is easy; for others, it may be more difficult due to tense family circumstances, geography, or the lack of living family members. Most advisors and attorneys counsel clients to choose family members or close friends. But, this may not always be an option. In this event, you could consider hiring a professional to one of these crucial positions.

Below are some of the vital decision-makers you may need to select. In addition, you will find questions to ask the prospective decision-maker.

financial decision-maker

The executor or personal representative.

You appoint his trusted individual, or fiduciary, in your last will and testament. They are responsible for collecting all your accounts and property. They also pay your outstanding debts and distribute your money and property to your named heirs or trustee. This person’s task is to wind up your affairs at your death, which can be time-consuming.

The successor trustee of a revocable living trust.

You should choose someone you trust as the successor trustee. You will ask them to manage, invest, and distribute the money and property from your revocable living trust to you during your lifetime. Upon your death, the successor trustee distributes your assets to your chosen beneficiaries after your death.

The agent under a financial power of attorney.

Your agent, or fiduciary, is an individual you choose to carry out financial transactions on your behalf (such as signing a check or opening a bank account). Subject to Texas state law, you may determine the type of authority in the financial power of attorney and when the agent may act on your behalf.

When it comes to selecting an agent to handle your financial transactions—whether at your death or during a time when you are unable to manage them yourself—there are several options available to you beyond family and friends.

• Ask if the bank or financial institution where you already have an account has a trust department. Because they are already familiar with managing your accounts, they could be a good fit to step in and assist you if needed.
• Interview a private trust company specializing in managing money on behalf of individuals. Because their job is to manage money and make distributions, they are well-equipped to handle the administrative tasks associated with financial decision-making.
• Consider asking your certified public accountant or financial advisor if they are willing to act on your behalf or know of someone who can.

When interviewing potential candidates, consider asking the following questions:

How do you charge?

You want to know how much the service will cost to ensure that there will be money left over to give to your beneficiaries. Some fiduciaries charge by the hour. Others charge a fee based on the percentage of assets collected. In the latter case, there is less incentive to drag out an already sometimes unavoidably lengthy process.

Do you keep records of the transactions you conduct on my behalf? Who has access to these records?

A fiduciary is an individual or entity who manages another person's finances. This means that they owe a duty to act in their best interest according to the law. A certain level of transparency can put you at ease because you will know that even if you cannot manage your financial affairs, the right people will get the information they need, and the wrong people will not.

How long does it take to administer an estate of my size?

Because time equals money in many instances, you want to ensure that the professional you hire will wind up your affairs as expediently as possible, without cutting corners.

How often do you communicate with the beneficiaries and my family members?

It is essential that everyone is on the same page. And, that the lines of communication remain open, even at your death. This can help avoid potential conflicts after you have passed away.

Do you require any unique language in the estate planning documents or additional paperwork?

Your estate planning attorney should ensure that the documents they prepare will function properly. A professional financial decision-maker may require additional documentation to allow them to step in when needed. Ensure that your attorney and fiduciary communicate about any potential additional paperwork. Doing so will ensure a smooth administration that will preserve more of your legacy for your beneficiaries.

What has been your best experience administering an estate or trust?

If you are meeting with the individual in charge of handling your affairs, this question can help you get a sense of what they value and how they do their job. This will also help determine if you would be an ideal client for the professional.

What has been your worst experience administering an estate or trust?

Take this opportunity to learn from others’ mistakes. Preparing ahead of time for smooth management and administration means that your financial needs—and those of your beneficiaries at your death—can be better met in a timely fashion.

Personal Care Decision-Maker

These may be the most challenging roles to fill because you are asking someone to look after your safety and welfare, as well as that of your beloved pet. Accordingly, each has unique considerations.

The agent under a medical power of attorney.

This trusted individual, or fiduciary, oversees making or communicating your medical wishes if you can no longer make or share them yourself. In addition to naming someone, make sure you have completed an advance directive or living will to make your medical wishes known to the healthcare staff treating you. You could also draft a letter of instruction to your agent. You could explain the types of medical decisions you would and would not want them to make on your behalf. Such instructions can be beneficial to guide your agent when they must make difficult decisions on your behalf.

Because of the sensitive nature of making medical decisions for another person,

consider naming a close friend or trusted professional. If you have no trusted family member to be your medical agent, your decision may be more difficult. It’s worth noting that state law may prevent certain professionals, such as doctors, from acting as an agent unless an exception exists.

Caretaker for your pet.

These members of your family are just personal property according to Texas law. Therefore, you need to consider thoughtfully who will be able to care for your pet. You will need to select someone to take possession of your pet. They should be willing to continue caring for your beloved pet if you can no longer do so.

If there is not a suitable owner among your family or friends, you could consider an organization. There are several that may be willing to help find the right forever home for your beloved pet.

When interviewing potential candidates for your personal care decision-makers, consider asking the following questions. Some of these questions are the same as those offered above for choosing financial care decision-makers. Still, you will want to dig deeper when discussing them with these candidates because you entrust these individuals with caring for you and your pet.

• Do you charge for your services? You must know ahead of time so money can be made available to cover these expenses. Some organizations may charge while others may not.
• When and how should you be contacted if your assistance is needed? Because you do not know when you will need their assistance, and you will likely not be the one contacting them, you must have an easy way for someone else to contact them in an emergency.
• Is there additional information or paperwork needed to carry out your role? You will want to ensure that the person or organization has all the necessary information before an emergency.

Not knowing whom to appoint to these crucial roles can quickly derail your estate planning process. Do not let this initial uncertainty prevent you from taking the necessary next steps to protect those you care about and yourself. Contact us today to discuss your options to ensure that you have trusted decision-makers in place to help you when needed.