estate planning attorney

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

What Is a Fiduciary and a Fiduciary Duty?

First, a fiduciary duty is the requirement that certain professionals, like attorneys or financial advisors, work in the best financial interest of their clients. By law, members of some professions with clients are bound by fiduciary duty.

Forbes’ recent article entitled “What Is Fiduciary Duty?” explains that in a fiduciary relationship, the person who must prioritize their clients’ interests over their own is called the fiduciary. The person getting the services or assistance is called the beneficiary or principal.

You will frequently see a fiduciary relationship with certain types of professionals, like attorneys and financial advisors. A fiduciary duty is a serious obligation, and if a fiduciary doesn’t fulfill his or her duties, it’s known as a breach of fiduciary duty. Fiduciaries must act in a beneficiary’s best interest. They have two main duties: duty of care and duty of loyalty. Fiduciaries may have different or additional requirements, depending on their industry.

With the duty of care, fiduciaries must make informed business decisions after reviewing available information with a critical eye. Lawyers must act carefully in performing work for clients. Care is determined by the prevailing standards of professional competence in the relevant field of law and geographic region. To abide by the duty of loyalty, fiduciaries must not have any undisclosed economic or personal conflict of interest. They can’t use their positions to further their own private interests. For example, fiduciary financial advisors might adhere to the duty of loyalty by disclosing recommendations from which they’ll receive a commission.

Other common professions or positions that require fiduciary duties include directors of corporations and real estate agents, as well as those discussed below:

Trustee of a Trust. When you want your assets to transfer to someone after you die, you can put them into a trust. The trustee who’s in charge of the trust has a fiduciary duty to manage the trust and its assets in the best interests of the beneficiary who will one day inherit them.

Estate Personal Representative or Executor. The person who manages your estate and handles your affairs is your personal representative. He or she has a fiduciary responsibility to your heirs and next of kin to distribute the estate according to your wishes.

Lawyer. Your attorney must disclose any conflicts of interest and must work with your best interests in mind.

Financial Advisors. Financial advisors who are fiduciaries must act in the best interest of their clients and offer the lowest cost financial solutions to fit their clients’ needs. However, it important to note that not all financial advisors are fiduciaries.

Reference: Forbes (July 28, 2020) “What Is Fiduciary Duty?”

 

What Is Involved with Serving as a Personal Representative?

Serving as the personal representative (or executor) of a relative’s estate may seem like an honor, but it can also be a lot of work, says The (Fostoria, OH) Review Times’ recent article entitled “An executor’s guide to settling a loved one’s estate.”

As a personal representative of a will, you’re tasked with settling her affairs after she dies. This may sound rather easy, but you should be aware that the job can be time consuming and difficult, depending on the complexity of the decedent’s financial and family situation. Here are some of the required duties:

  • Filing court papers to initiate the probate process
  • Taking inventory of the decedent’s estate
  • Using the decedent’s estate funds to pay bills, taxes, and funeral costs
  • Taking care of canceling her credit cards and informing banks and government offices like Social Security and the post office of her death
  • Readying and filing her final income tax returns; and
  • Distributing assets to the beneficiaries named in the decedent’s will.

Every state has specific laws and deadlines for a personal representative’s responsibilities. To help you, work with an experienced estate planning attorney and take note of these reminders:

Get organized. Make certain that the decedent has an updated will and locate all her important documents and financial information. Quickly having access to her deeds, brokerage statements and insurance policies after she dies, will save you a lot of time and effort. With a complex estate, you may want to hire an experienced estate planning attorney to help you through the process. The estate will pay that expense.

Avoid conflicts. Investigate to see if there are any conflicts between the beneficiaries of the decedent’s estate. If there are some potential issues, you can make your job as personal representative much easier, if everyone knows in advance who’s getting what, and the decedent’s rationale for making those decisions. Ask your aunt to tell her beneficiaries what they can expect, even with her personal items because last wills often leave it up to the executor to distribute heirlooms. If there’s no distribution plan for personal property, she should write one.

Personal representative fees. You’re entitled to a personal representative fee paid by the estate. In Florida, personal representatives are allowed to take a percentage of the estate’s value, generally 3%, depending on the size of the estate. However, if you’re a beneficiary, it may make sense for you to forgo the fee because fees are taxable, and it could cause rancor among the other beneficiaries.

Reference: The (Fostoria, OH) Review Times (Aug. 19, 2020) “An executor’s guide to settling a loved one’s estate”

 

Trusts: The Swiss Army Knife of Estate Planning

Trusts serve many different purposes in estate planning. They all have the intent to protect the assets placed within the trust. The type of trust determines what the protection is, and from whom it is protected, says the article “Trusts are powerful tools which can come in many forms,” from The News Enterprise. To understand how trusts protect, start with the roles involved in a trust.

The person who creates the trust is called a “grantor” or “settlor.” The individuals or organizations receiving the benefit of the property or assets in the trust are the “beneficiaries.” There are two basic types of beneficiaries: present interest beneficiaries and “future interest” beneficiaries. The beneficiary, by the way, can be the same person as the grantor, for their lifetime, or it can be other people or entities.

The person who is responsible for the property within the trust is the “trustee.” This person is responsible for caring for the assets in the trust and following the instructions of the trust. The trustee can be the same person as the grantor, as long as a successor is in place when the grantor/initial trustee dies or becomes incapacitated. However, a grantor cannot gain asset protection through a trust, where the grantor controls the trust and is the principal recipient of the trust.

One way to establish asset protection during the lifetime of the grantor is with an irrevocable trust. Someone other than the grantor must be the trustee, and the grantor should not have any control over the trust. The less power a grantor retains, the greater the asset protection.

One additional example is if a grantor seeks lifetime asset protection but also wishes to retain the right to income from the trust property and provide a protected home for an adult child upon the grantor’s death. Very specific provisions within the trust document can be drafted to accomplish this particular task.

There are many other options that can be created to accomplish the specific goals of the grantor.

Some trusts are used to protect assets from taxes, while others ensure that an individual with special needs will be able to continue to receive needs-tested government benefits and still have access to funds for costs not covered by government benefits.

An estate planning attorney will have a thorough understanding of the many different types of trusts and which one would best suit each individual situation and goal.

Reference: The News Enterprise (July 25, 2020) “Trusts are powerful tools which can come in many forms”

Suggested Key Terms: