Fiduciaries in Your Estate-Planning Documents
Ethan R. Okura
Hawai‘i Herald Columnist
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, called the “fiduciary,” occupies a position of great trust and responsibility. When you name this fiduciary in your document, you usually give her or him the power to buy, sell and manage assets for you.
Here are some common fiduciary positions created by estate-planning documents:
Trustee: A trustee, appointed in a trust document, has the job of managing, investing and distributing the trust 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 serving as trustee is called a “corporate fiduciary.” There are three Hawai‘i banks that can serve as corporate fiduciaries: Bank of Hawaii, Central Pacific Bank and First Hawaiian Bank. Corporate fiduciaries charge a fee; however, an individual (such as a son or daughter) who serves as trustee usually doesn’t 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. Two different paired sets of words actually describe the fiduciary who handles the estate of a person who dies. An “executor” (male) or “executrix” (female) is the person who handles the estate of someone who dies with a will. An “administrator” (male) or “administratrix” (female) is the person who handles the estate of someone who dies without a will. In 1976, however, the Hawai‘i legislature passed probate laws which used the term “personal representative” to replace these four 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 her or him distribute the assets without a court order.
Attorney in Fact: The “attorney in fact” is not a lawyer but 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 the signed form 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 the 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, so that things go smoothly.
If you would like to, you can name two or more people to be co-fiduciaries; in this case, you should choose whether you will require them to act by unanimous decision or by majority vote. You can even allow each 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 in the event that you can’t manage your finances, then in that situation, 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 entertainment recent news, you know that pop-star Britney Spears has not been allowed to manage her own money for the past 13 years. This is because the court appointed her father as her conservator in 2008, and although she has expressed a 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 2021, her case is still pending. 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 Hawai‘i 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, 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 the case goes to a court to decide for you.
Ethan R. Okura received his JD 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.