Do's and Don't of Acting as an Estate Fiduciary
The fiduciary of the estate has a series of important responsibilities and duties. It is important to understand your role as fiduciary and your responsibilities because you will be held accountable for your decisions and actions.
Collection and Management of AssetsFirst, your duties as fiduciary are to protect and preserve the estate assets. You will need to
* Inventory of all assets and their values as of the date of death.
* Collect or "marshal" the assets of the decedent's estate.
* Obtain an Affidavit of Successor Trustee under a trust administration or Letters Testamentary or Letters of Administration with under a probate estate to demonstrate to third parties that you are in fact authorized to act .
* Remove valuables from the residence and store safely.
* Complete a change of address form with the Post Office to have the decedent*s mail forwarded to you.
* Determine whether it is appropriate to change locks on any property not occupied by the spouse or a primary beneficiary.
* Determine immediate cash needs for any beneficiary; identify accounts where cash is immediately available; determine if any immediate expense must be paid. (Hint: There are not many).
* Cancel credit cards, charge accounts and magazine subscriptions and ask for refunds, if possible.
* If you can gain access to the decedent's safe deposit box, do not remove contents until it has been inventoried in the presence of a bank officer. Only then should contents be removed.
* Gather personal records, including checkbooks and statements for at least three years; obtain copies of income tax returns for last three years.
* Contact individuals who owe money to the decedent and arrange for continued collection.
* Determine whether decedent had an interest in a partnership, Limited Liability Company, closely-held corporation or other active business interest and arrange for continued operation and safeguarding of decedent*s interest in the business.
* Gather all life and accident insurance policies. (Don*t forget to check travel clubs, alumni associations, credit card companies, trade associations and any organization that might make life insurance available to its members.)
* Contact Social Security and VA if applicable.
* Hold any Social Security received after date of death, as benefits paid during the month of the decedent*s death will be recalled by the Social Security Administration.
* Make certain that property and casualty insurance coverage continues on personal effects, automobiles, real estate and any goods in storage.
* Check for fire insurance on dwelling. Confirm whether the coverage applies if the dwelling is vacant.
* Employ any necessary domestic help, security guards, or any other type of assistance that might be required for dependent or beneficiary.
* Obtain all checkbooks and gather any outstanding bills that arrive.
Documents to be Located and GatheredYou should obtain originals of the following documentation:
1. Trust Agreement and Pour-Over Will (if applicable) or Last Will and Testament (if applicable);
2. Deeds and other documents assigning assets to the trust or to the decedent;
3. Vehicle titles;
4. Insurance policies (life, house, vehicle, title, etc.);
5. Any business agreements, leases, promissory notes, etc.
6. Property tax statements on real estate;
7. Appraisals on real estate completed in the past two years;
8. Statements for all bank accounts, investments and other assets;
9. Mortgage statements;
10. The deceased's tax returns for the past three years, if any have been filed.
11. 5 to 10 certified copies of Death Certificate;
Payment of Debts, Taxes and ExpensesMost decedents have some bills or other debts that must be promptly paid after death. Depending on whether the obligations are addressed through a probate estate or from a trust, you may have different responsibilities and repayment options. Some of the fees and expenses may not be payable until the probate estate, if any, is ready for distribution to the beneficiaries.
You might need to file Estate Tax Return, even if the estate won't owe estate taxes because there are other important benefits to filing, and you will have to file a tax return for the deceased and any taxable income attributable to the estate. The advice of competent counsel to assist you in the preparation of all tax returns is advisable.
Distribution of Estate Property to BeneficiariesWhile you are administering a trust, beneficiaries may be entitled to ongoing payments of income and/or principal. The fiduciary may be allowed to distribute property in kind or sell properties and distribute cash. The provisions relating to the distributions to beneficiaries are contained in the trust. On final distribution of the remaining assets, the fiduciary should obtain a receipt from each beneficiary.
If you are administering a will, beneficiaries may be able to receive some distributions during the course of the estate administration under certain circumstances (e.g., family allowance, petition for partial distribution, etc.); however, in most circumstances the estate is not distributed until the very end of the court proceedings.
If you are aware that any beneficiary has a guardian or if assets will be distributed into another trust for any beneficiary, you will need to know the identity and address of the guardian or trustee. If any beneficiary is a minor, you will need to provide the beneficiary*s date of birth. If any person named as a beneficiary died before the decedent, you will need to know that person's date of death and the identity of their heirs.
The Importance of Your Role as FiduciaryThe following is intended to be a layperson's introduction to some of the most basic duties the law imposes on fiduciaries. The implications and nuances of your duties as fiduciary are broad and far-reaching, so it is critical that you act with caution.
Duty of Loyalty
As fiduciary, you have agreed to take on the duty of placing the interests of the estate and its beneficiaries above your own. Your most fundamental duty is the obligation to act solely in the beneficiaries' best interest. This means that you must not only do what is best for the trust's or estate's beneficiaries, but that you do so without furthering your own interests unless the beneficiaries consent in writing after full disclosure and independent counsel. As with the other fiduciary duties, if your non-compliance results in any losses or damages to the trust property, you and any co-fiduciaries may be liable for any decrease in value.
You should not enter a transaction that gives you an opportunity to benefit yourself at the expense of the estate. If any situation should arise in which there is a conflict between your personal interests and the estate or between the estate and the interests of third parties, you as fiduciary must put the interests of the estate first.
One very important aspect of your duty of loyalty is the avoidance of self-dealing. A fiduciary is self-dealing when he or she benefits in any way from the estate. A few examples of self-dealing, which can result in a breach of the duty of loyalty include:
* Buying trust property or leasing trust property to yourself, either directly or indirectly;
* Selling your own property to the estate;
* Employing yourself to do specialized work for the trust (such as appraisals, conduct sales, etc.);
* Accepting a gift from someone with whom you conduct trust business;
* Dealing preferably with relatives and friends
Duty of Impartiality
You have an obligation to act in an unbiased manner toward the various beneficiaries (absent a provision under the trust agreement or will to the contrary). This means that you cannot favor an income beneficiary over a remainder beneficiary, nor favor one income beneficiary over another unless it is consistent with the terms of the trust or will.
For instance, when allocating or distributing assets to the beneficiaries, you cannot allocate preferable assets to certain beneficiaries and less desirable assets to others if the trust agreement (or will or intestate statutes) treat them the same, you must ensure that they are treated equitably, showing no favor to any one in particular.
Duty to Preserve Assets
As the fiduciary, you are required to preserve the estate's property. This means that you must pay taxes on the property, insure it against loss, protect it from theft and maintain the property's condition to ensure that its value is not decreased. These expenses are reasonable estate expenses and should be paid from the estate assets.
Duty to Account
Keep clear and accurate records of all transactions affecting the estate property separate from your own property. A breach of your duty can make you liable to the beneficiaries.
General Advice1. How to Sign Your Name as a Fiduciary
When you sign anything on behalf of the estate, always sign your name followed by your fiduciary capacity e.g., "John Doe, Trustee" or "Mary Roe, Personal Representative." This notifies persons with whom you are dealing that you are acting in your capacity on behalf of the estate and not conducting personal business.
2. Read the Trust or Will
This is the best source for determining the decedent*s intent and what your job is. It is also the best source for determining what the beneficiaries will receive. Finally, it is your best defense for justifying your actions as fiduciary.
3. Keep Records and Take Copious Notes
The more organized you are and the better you keep the estate*s records, the more clearly you can present information to the beneficiaries and others when necessary.
4. Deciding Whether to Accept a Fee
As fiduciary, your primary duty is to administer the estate exclusively for the benefit of the beneficiaries. Your duty of absolute loyalty means you must put the interest of the beneficiary above your own interests. Being a fiduciary is a paid position. Sometimes the trust or will provides guidance for calculating the fiduciary*s fee, and sometimes it only specifies *reasonable compensation.* Consider discussing at the outset of the administration with the primary beneficiaries, at least, the amount of fee, either hourly or flat, that you consider reasonable. Always keep track of your time.
Sometimes it seems that the fiduciary is paid quite well for doing very little. While that may seem unfair, keep in mind that as the fiduciary, you are also giving something up; that is, you are giving up is the opportunity to benefit in ways that you might otherwise benefit merely because of your role as fiduciary. In other words, you are being paid for your loyalty. For that reason, you should strongly consider accepting the reasonable compensation that the document allows.