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Selection of a Professional Fiduciary for Estate Administration in Ohio

Selection of a Professional Fiduciary for Estate Administration in Ohio
April 5, 2016 Shannon Dawes
Selecting a Professional Fiduciary for Estate Administration in Ohio

Columbus Estate Planning Lawyer Highlights Benefits to Selection of a Professional Fiduciary for Estate Administration

Many individuals considering an estate plan automatically select a close relative as their financial fiduciary, but this post examines some potential pitfalls of this approach. Although the selection of a close family member can be appropriate, there are specific issues and potential problems that must be considered. While the best option is to talk to a Columbus estate planning attorney about the selection of a representative to administer your estate, we have provided some issues that you should keep in mind if you are considering a friend or family member.

Disadvantages to Choosing a Family Member as a Financial Fiduciary

While the impact of selecting a loved one on family dynamics is the most apparent drawback of not using a professional fiduciary, there are other potential disadvantages. Whether the individual is appointed to act as a trustee of a revocable trust, the executor of a will, or an attorney-in-fact under a financial power of attorney, there are several issues to consider.

Competence Regarding Financial Matters: A spouse or adult child is an obvious choice to act as a financial fiduciary, but either of these choices might lack the necessary experience and financial expertise. While many people tend to consider administration of a trust or estate as a relatively simple and low risk “family matter,” the administration of a trust or estate can involve complex financial arrangements and decisions that a family member might be ill-equipped to handle. The selected fiduciary should be mature, relatively financially savvy, and capable of interacting on an amicable basis with other beneficiaries and family members. An informed decision on who to name as a financial fiduciary should involve a discussion with a Columbus estate planning lawyer regarding the benefits, costs, burdens, and risks associated with selecting a family member rather than a professional third-party.

Lack of Objectivity: When a family member is designated to make estate and trust management and administration decisions, the appointed individual’s lack of objectivity can become a significant issue. Professionals like attorneys and financial planning experts do not have an emotional connection to the beneficiaries or a stake in the distribution of assets in an estate. However, a family member is in a position to be influenced by family friction and disputes. Since a spouse or adult child also will tend to serve a dual role as beneficiary and administrator or trustee, this can create a conflict of interest that frustrates the intentions of the individual who crafts a will, trust, or financial power of attorney. The risk of conflicts of interest is even greater when the decedent has several prior marriages, as well as children and step-children from multiple prior relationships. An adult child or spouse might inappropriately wield his or her authority in a vindictive manner as recompense for real or perceived transgressions.

Insufficient Knowledge of the Law and Estate Planning Instruments: Family members are less likely to be well-versed than a professional fiduciary regarding relevant statutory and common law or compliance with the provisions of an estate planning instrument. Proper administration of a trust or financial power of attorney requires competence and knowledge in making and managing prudent investments. Estate or trust administration fiduciaries also must have a familiarity with requirements involving copies of estate planning instruments and mandatory accounting practices.

Time Commitment Issues: While professional fiduciaries can be expected to devote sufficient time to carrying out their duties, a loved one often views accepting this responsibility as a “favor” to other family members. The family fiduciary might be limited in the performance of these duties by personal and business responsibilities. Administrative errors or an unintended breach of administrative duties can be costly and cause further friction between family members. If the family fiduciary is not consulting with legal counsel, professional financial advisors, and tax experts, expensive mistakes become a significant risk.

If you have questions about estate planning in Columbus, we welcome the opportunity to talk to you and answer your questions. We invite you to speak to a Columbus estate planning lawyer at Dawes Legal, LLC by calling 614-733-9999 or email us to learn how we can help.