Reprinted with permission from The Legal Intelligencer, August 19, 2025. © 2025 ALM Global, LLC. All rights reserved.
One of the most important decisions in estate planning is the selection of the fiduciaries who will be named to carry out the various aspects of a plan. The person or entity selected to serve in a fiduciary role, such as an executor, trustee, guardian, or agent, has a duty to not only implement an estate plan, but also to manage investments, distribute assets to a beneficiary, maintain an accounting, and often make difficult financial and healthcare decisions. The choice of a fiduciary may have a significant impact over multiple generations and should therefore be selected with deliberation and great care.
Financial Power of Attorney
A financial power of attorney permits an agent to handle financial transactions on behalf of a principal, such as banking, real estate, tax related matters and gifting. Individuals typically select an agent who is responsible and has financial expertise, organization, and attention to detail as the agent will have the ability to control and dispose of the principal's assets. An individual may select one agent to act alone or may appoint multiple agents who either act by majority decision or with unanimity. Appointing multiple agents may provide for checks and balances between or among the agents but requiring multiple agents can also result in delaying the agents' ability to act if they are unreachable, located in different places, or disagree. Centralizing authority in a single agent is often more efficient when actions must be taken quickly.
If an individual owns his or her own business, it is common for individuals to bifurcate the agency role between an agent for the principal's business and an agent for the principal's personal finances. Often, the business agent is someone familiar with the day-to-day workings of the business and may easily step into the principal's business role if the principal becomes incapacitated.
Health Care Power of Attorney and Living Will
In a health care power of attorney or living will, an individual may appoint a health care agent to make medical decisions on behalf of the principal. These decisions may include consent to or refusal to consent to medical procedures, access to protected health information, or making difficult end-of-life decisions. When selecting health care agents, individuals may want to select an agent who is familiar with the health care system so that the agent can better navigate the medical decision-making process, communicate with medical professionals, and understand medical options for the principal. Choosing an agent located in close geographic proximity to the principal may be especially helpful in an emergency, in a prolonged medical situation, or when continued observation of the principal's medical condition will be important. An individual may also want to select a health care agent who is most likely to carry out the principal's wishes in a reasoned and logical manner rather than someone who is more likely to act emotionally, waiver, or fundamentally disagree with the principal's end-of-life views.
Executor
An executor is responsible for administering a decedent's estate. The executor serves the role of gathering the decedent's assets, paying the decedent's outstanding debts, paying estate administration expenses, filing various tax returns, accounting for the assets of an estate, and distributing assets to beneficiaries. The executor's job is finite in time—an estate is usually open for less than three years so serving as an executor is not an indefinite commitment. Nonetheless, the executor's role can be time and labor intensive, depending upon the state of the decedent's estate and the organization of the decedent's affairs at death.
An executor should be organized, be able to keep track of deadlines, multi-task, have financial acumen, and most importantly, have the time to serve as executor. Because the executor will likely be working with family members to understand the decedent's financial picture, it may be useful to select an executor who has a positive relationship with family members and who can easily work with family members. It may also be beneficial to select an executor who feels comfortable working with various professionals in the administration of the decedent's estate. The executor may need to navigate probate court or work with county and state governmental officials, negotiate with creditors and taxing authorities, hire an attorney, certified public accountant, or investment adviser, or work with appraisers to value assets. Having an executor who can easily navigate the relationships that will be encountered in an estate administration can help facilitate the administration process.
Guardian of Person and Property
If an individual has minor children, one should consider appointing a guardian of the person and property of one's minor children in an estate plan. A guardian of the person of a minor child is the individual who is appointed by the court to make decisions for a minor child during minority. The guardian of the property of a minor child is the individual who manages and controls a minor's assets during minority. Both the guardian of the person and the guardian of the property must act in the best interests of the minor, and both owe a fiduciary duty to the minor.
Trustee
Individuals frequently incorporate the use of trusts in their estate plans. Trusts may be designed for many different purposes—they may serve to hold assets for minor children, protect a beneficiary from creditors, protect a beneficiary from himself or herself, minimize estate or income taxes, create a structure that will continue in perpetuity and avoid generation skipping transfer tax, protect the privacy of a settlor or beneficiary, allow a beneficiary to benefit from assets without being disqualified from receiving public benefits, or assure that a testator's or settlor's estate plan flows in the manner in which he or she desires. Since trusts may potentially exist for years, decades, or generations, the selection of a trustee is usually a significant decision to a settlor or testator because it will be the job of the trustee to carry out the legacy of the settlor or testator.
In selecting a trustee, one must first decide whether to use an individual trustee or an institutional trustee such as a bank or trust company. Institutional trustees often have a greater level of experience and expertise than individuals and may be especially useful in more complex and larger trusts. Institutional trustees are well-equipped to prepare trust accountings, manage investments, prepare tax returns, and make discretionary distribution decisions that balance the interests of present and future beneficiaries. Institutional trustees may be especially helpful in navigating complex tax and familial situations based upon their knowledge and experience in handling such situations.
Institutional trustees can also be ideal in situations where no individuals want to be the "bad guy" when it comes to denying related beneficiaries distributions from a trust. Rather than an individual refusing to make a distribution to a related beneficiary, which action could serve to harm the relationship between the individual trustee and the beneficiary, an institutional trustee can serve as the "bad guy" and deny a distribution if, despite the views of the beneficiary, it is in the best interests of a beneficiary to withhold a distribution. By having an institutional trustee serve in this role, a related individual who would otherwise serve as trustee is protected from being the "bad guy," thereby maintaining the relationship between the related individual and the beneficiary.
Institutional trustees can be especially helpful when creating a trust in a specific jurisdiction. Some jurisdictions that may have beneficial trust or tax laws require a trustee to be located in the specific jurisdiction. By utilizing an institutional trustee in the jurisdiction of choice, a trust can better establish a situs in a preferred jurisdiction.
While institutional trustees can be very beneficial, institutional trustees charge a fee for their services, which is usually higher than fees otherwise charged by individual trustees. Most institutional trustees charge fees under a fee schedule based upon the size of the trust or the assets under management in a relationship. Some directed trustees will charge a flat annual fee if they are serving in a more limited role. Ultimately, a settlor or testator will need to determine in each situation whether the benefits of an institutional trustee offset the financial costs.
If a settlor or testator chooses to appoint an individual trustee, the settlor or testator should determine which individual to appoint. When selecting an individual trustee, the settlor or testator should consider the individual's expertise, knowledge, relationship with the beneficiary, attention to detail, ethics, values, and geographic proximity to the beneficiary. Depending upon the identity of the beneficiary and the purpose of the trust, the individual trustee could be a beneficiary, a family member, an unrelated individual, a professional such as an accountant or lawyer, or a family friend. The individual trustee should be someone who will likely live long enough to serve in the role and may even be an individual in the same generation or one generation above the beneficiary. For example, if a parent is appointing a trustee of a trust for his or her ten year old child that will last for the next fifty years, it would be highly unlikely that an eighty year old grandparent will or should serve out the term of the trust.
The settlor or testator should also carefully consider the
selection of successor trustees and the mechanism for appointing
successor trustees. Depending upon the age and identity of the
initial trustee and the term of the trust, it is quite possible
that a successor trustee will serve during the term of the trust,
and the identity of the successor will be just as important as the
identity of the initial trustee.Finally, the settlor or testator
should consider whether to appoint multiple trustees. The settlor
or testator could appoint multiple individual trustees or an
individual trustee with an institutional trustee. Having multiple
trustees can serve as a check and balance on the trustees and is
sometimes used to assure that either a family member serves or an
independent third party serves. By utilizing an institutional
trustee with a family member individual trustee, a trustee may
benefit from the institutional knowledge and independence of an
institution while having the familial relationship of an
individual.
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Naming fiduciaries in an estate plan is one of the most important
decisions an individual must make in planning as the decision can
shape the implementation of an estate plan for years, decades, and
generations. Through the careful selection of fiduciaries, an
individual can assure that his or her legacy can be carried out in
a manner consistent with his or her testamentary goals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
