Glossary of Legal Terms
In the estate planning field, the term “FIDUCIARY” is used to describe the role of any agent, such as an executor, trustee, guardian, attorney-in-fact, and health care representative. Generally, a fiduciary is a person (or financial institution) entrusted with the safekeeping, management and administration of one’s affairs. The following categories of “fiduciaries” should be considered in your estate plan:
- An executor is the person responsible for administering a person’s estate after they die. Administration is the process of collecting all of the decedent’s assets, paying his debts, filing tax returns and distributing any remainder to the decedent’s beneficiaries pursuant to the terms of his Last Will and Testament (or, if the decedent dies without a Will, then by the laws of intestacy). The role of executor lasts for a finite period of time in which the executor, together with the lawyer, fulfills the previously listed tasks. An executor may be one or more individuals, and may also be a named beneficiary in the Will. Consideration should also be given to naming successor executors (usually one is sufficient) in the event that a first choice becomes unable to serve.
- A trustee is the person who will administer a trust. A trust is either established during life, or is part of one’s Last Will and Testament. Trusts may be established for a spouse, for children and grandchildren, a friend or charity, or for all of above. The trustee manages the assets in trust and distributes the money to the trust beneficiaries. This person does not need to be a financial expert, although such acumen is helpful. Further, this trustee role, unlike the temporary role of executor, could last for years throughout a trust term. As with any other fiduciary, a successor or alternate trustee should be named.
- If you have minor children who are under the age of 18, or if you have a special needs child, regardless of such child’s age, you should appoint one or more persons to serve as guardian of such child in the event of your death or disability. Such a designation would avoid the necessity of a court proceeding. You should also consider a successor in the event that your first choice is unable to serve. The guardian does not have to be the same person who would manage finances for your children (although it is perfectly acceptable for them to wear both hats). If you chose a married couple to serve together as co-guardians, consider your wishes in the event they divorce. Factors to consider in selecting a guardian include the age and health of the proposed guardian, his or her personal and financial situation, the number and ages of other children, the ages of your children and the number who are currently minors, as well as the faiths, philosophies and attitudes of everyone involved.
- Attorney-in-Fact (Agent) of a Power of Attorney
- You may appoint an “attorney-in-fact” or agent to take care of all of your legal and financial affairs in the event that you become disabled. The simple process of appointing an attorney-in-fact will likely eliminate the need to pursue a guardianship or conservatorship in the future. There are two types of powers of attorney: General Durable and Springing. Under the law, a power of attorney will become ineffective once the principal becomes incapacitated or disabled. Thus, if you want the power of attorney to be effective upon signing, and REMAIN EFFECTIVE throughout such disability or incapacitation, it must specify that it is “general durable.” A springing power of attorney, by contrast, does not become effective on the date it is signed, but rather “springs” into effect upon a showing that the principal has become disabled or incapacitated and is no longer capable of handling his or her financial and legal affairs. In naming someone as attorney-in-fact, you should carefully consider their ability to invest and manage finances. You should consider a successor attorney-in-fact in the event your first choice is unable or unwilling to serve. These individuals do not need to be the same as your health care representative described below. More than one person may serve as attorney-in-fact, and as always, a successor designation is advisable.
- Health Care Representative
- You may appoint a “Health Care Representative” to take make all of your health care decisions in the event that you are unable to make such decisions for yourself. This person will consult with your physician to arrive at the best decision for your care. This person will also have access to your medical records. It is not advisable to choose two persons to serve jointly, as disagreement among your joint representative could lead to delay and confusion for the physician. It is best to choose a primary representative and a secondary in the event your first choice is unable to serve.