FIDUCIARIES IN YOUR ESTATE PLANNING DOCUMENTS
When you sign an estate planning document such as a revocable living trust or a will, you appoint someone to handle your assets for you. The person you choose to handle things for you is called a “fiduciary.” A “fiduciary” is in a position of great trust and responsibility. A fiduciary named in your document usually has the power to buy, sell and manage assets for you.
Here are some of the common fiduciary positions created by estate planning documents:
Trustee: A “trustee” is appointed in a trust document. The trustee has the job of managing the trust assets, investing the trust assets, and distributing the assets to beneficiaries named in the trust. When you create a revocable living trust, you usually name yourself as trustee. That way, you can keep controlling the assets you put into the trust. In the trust document you also name one or more “successor trustees.” A successor trustee becomes the trustee and can control the trust assets when the original trustee dies, resigns or becomes incapacitated. A trustee can be an individual such as a family member or trusted friend, or it can be a bank or trust company. A bank or trust company which serves as trustee is called a “corporate fiduciary.” The three Hawaii banks which serve as corporate fiduciaries are Bank of Hawaii, Central Pacific Bank and First Hawaiian Bank. Corporate fiduciaries charge a fee. An individual such as a son or daughter who serves as trustee often will not claim a fee.
Personal Representative: The “personal representative” is the person named in your will who will settle your probate estate after you pass away. There are actually four different words to describe the fiduciary who handles the estate of a person who dies. An “executor” is a male person who handles the estate of someone who dies with a will. An “executrix” is a female person who handles the estate of someone who dies with a will. An “administrator” is a male person who handles the estate of someone who dies without a will. An “administratrix” is a female person who handles the estate of someone who dies without a will. In 1976, the Hawaii legislature passed probate laws which used the term “personal representative” to replace the four other terms. The personal representative generally has no power to do anything until after the court appoints him or her as the personal representative in a court order. However, if the estate is worth $100,000 or less and includes no real estate, the personal representative can claim the assets by signing an affidavit (a sworn statement signed before a notary public), which lets him or her distribute the assets without a court order.
Attorney in Fact: The “attorney in fact” is not a lawyer. It is your husband, wife, son, daughter, brother, sister, friend, or other person named in your power of attorney as your agent. If the power of attorney document gives the attorney in fact the power to act immediately, the attorney in fact can sign papers for you even if you are still healthy and competent. If it is a “durable” power of attorney, the attorney in fact can act for you even after you are incapacitated. However, your attorney in fact cannot act for you after your death. Your power of attorney document becomes invalid once you pass away.
If you have a revocable living trust, a will and a power of attorney, here is how they work together: while you are healthy, if you are trustee, you handle all assets in your trust as trustee, and you personally handle any assets outside of your trust as the owner. If you become incapacitated, your successor trustee (named in your trust document) handles all assets in your trust, and your attorney in fact (named in your power of attorney) handles any assets that are not in your trust. If you pass away, your successor trustee handles all assets in your trust, and your personal representative (named in your will) handles any assets not in your trust. It is often a good idea to have the same person or persons be your successor trustee, personal representative, and attorney in fact, to have things go smoothly.
If you would like to, you can name two or more people to be co-fiduciaries, and you can choose whether you will require them to act by unanimous decision or by majority vote. You can even allow each one of them to have all the power to act independently on their own without consulting the other co-trustee, co-attorney-in-fact, or co-personal representative.
If you don’t set up a trust and/or power of attorney that specifies whom you want to act as your fiduciary or co-fiduciaries when you can’t manage your finances someday, then when that day comes the court will appoint a “conservator” to step in and handle your finances and assets. It might not be the person whom you would want to manage your money.
If you’ve been following the recent news about the pop-star, Britney Spears, she has not been allowed to manage her own money for the past 13 years because the court appointed her father as her conservator in 2008, and although she has expressed her desire to end the conservatorship, or at least have the court appoint someone else other than her father as conservator, at the time of this writing in July of 2021, her case is still pending, and in the meantime, millions of dollars have gone to her father for his services as conservator. Another case that is closer to home here in Hawaii is that of Princess Abigail Kawānanakoa. She wanted her spouse to be able to manage her finances, but the court appointed someone else as her conservator.
It’s hard to say if these decisions are actually in the best interest of the individuals involved or not, but one thing is sure: If you don’t specify who you want to name as your fiduciaries ahead of time, there’s a good chance that your wishes might not be honored when if goes to a court to decide for you.
© OKURA & ASSOCIATES, 2021
Honolulu Office (808) 593-8885
Hilo Office (808) 935-3344
Kauai Office (808) 241-7500
Ethan R. Okura received his Doctor of Jurisprudence Degree from Columbia University in 2002. He specializes in Estate Planning to protect assets from nursing home costs, probate, estate taxes, and creditors.
This column is for general information only and is not tax or legal advice. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.