Different Types of Fiduciaries

Beginning to plan one’s estate isn’t an easy task, and can be a dim reminder of mortality. Many people put off estate planning until they’re at the end of the road, which works in some cases, but can sometimes leave the person’s family straddled with an unmanageable tax burden, debt, or, at the very least, a complicated financial situation. According to CNN Money Magazine, “granting someone you trust the power of attorney allows that person—known as your ‘agent’ or ‘attorney in fact’ to manage your financial affairs if you are unable to do so.” Your power of attorney has the right to sign your name in the event that you are incapacitated, and is required to be your “fiduciary—meaning they must act in your best financial interest at all times and in accordance with your wishes.”  Different Types of Fiduciaries

Choosing a power of attorney, or fiduciary, is best done in the company of a qualified estate-planning lawyer. “An attorney can help you decide which form makes the best sense for your circumstance,” reports CNN Money. There are two different types of fiduciaries you can ask someone to be: the first is the “springing power of attorney.” This type of agent would only be able to act on your behalf “under circumstances that you specify, the most typical being when you become incapacitated.” The other type of agent is known as the “durable power of attorney.” This person would be able to act on your behalf effective immediately. That person does not have to prove via doctor’s letters in court that you are incapacitated. Determining which type of fiduciary is best for your situation is, again, done best with the assistance of a qualified estate-planning attorney.

Some people choose a family member or a close friend to be their fiduciary. This means you likely won’t have to pay them for their assistance. “But if you name a bank, lawyer, or other outside party,” according to CNN Money, “you will have to negotiate compensation.” Compensation can range anywhere from an hourly fee to a percentage of your assets. If you fail to appoint someone to be your agent before you become incapacitated, you will be obliged to appoint a guardian. “This process might cost your family well over $1,000, not including the cost of the guardian’s annual visits to court to report on your situation.”

If you or someone you know is in the beginning stages of estate planning, don’t go through it alone. Contact a dedicated Chicago-area estate-planning attorney today.