Fiduciary Administration Outline

FIDUCIARY ADMINISTRATION TRITT SPRING 2017

PRELIMINARY ISSUES BEFORE PROBATE

Tritt’s Overarching Question:

Whose interests should take priority in making property transfers – the property owner or the beneficiaries?

Majority view – beneficiaries
Tritt’s view – decedent, grantor, or settlor’s intent; deadhand control

Fiduciary administration is two parts:

Probate
Fiduciary Duties (policy)

Terms

Fiduciaries

A person entrusted with another person’s property
A person having a duty to act primarily for another’s benefit in matters connected with such undertaking
Includes terms such as good faith, trust, special confidence, and candor towards another
A fiduciary has duties to the person he/she is in charge of
There is no fiduciary relationship without duties
There is a difference between someone acting in their individual capacity v. someone acting in their fiduciary capacity

One acts in a fiduciary capacity when the business he/she transacts or the money or property that he/she handles is not his/her property for his/her benefit

Hallmark of ET (?): High degree of good faith
Most common fiduciary is a trustee of a trust, but fiduciaries can include business advisers, attorneys, guardians, administrators of estates , real estate agents, bankers, stockbrokers, title companies, or anyone who undertakes to assist someone who places complete confidence and trust in that person or company
Characteristically, the fiduciary has greater knowledge and expertise about the matters being handled
A fiduciary is held to a standard of conduct and trust above that of a stranger or a casual business person

He must avoid self dealing and COIs in which the potential benefit to the fiduciary is in conflict with what is best for the person who trusts him

A fiduciary relationship is where one person places complete confidence in another in regard to a particular transaction or one’s general affairs or business. The relationship is not necessarily formally or legally established as in declaration of trust, but can be one of moral or personal responsibility due to the superior knowledge and training of the fiduciary, as compared to the one whose affairs the fiduciary is handling
It is important to know when you are acting in a fiduciary capacity because if you blur the line, they can come after your personal assets
For all fiduciary matters the following questions are raised*

Is the individual or entity a fiduciary?
If so, did they have a pertinent power?
If so, did they have a particular power?
Did they breach that duty?
Does the fiduciary have any defenses?
If so, what are the remedies for the beneficiary if the duty was breached?

UTC § 105 and UTC § 801 say that a fiduciary’s overarching duty is to follow the terms of the instrument

Executors/Personal Representatives

Tritt refers to these as “liquidators”
The terms executor, administrator, and PR are used interchangeably. Florida uses PR

If intestate, some states refer to PR as administrator/rix

Duty to settle and distribute the estate of the decedent in accordance with the terms of any probated and effective Will
UPC § 3-703 defines executor (using the term PR)
The person appointed to administer the estate of a decedent whose Will nominates that person

Unless there is a valid objection, the judge will appoint the person named in the Will to be executor
The executor must ensure that the person’s desires expressed in the Will are carried out
Practical responsibilities include: gathering up and protecting the assets of the estate, obtaining information in regard to all beneficiaries named in the Will and any other potential heirs, gathering payment for the estate’s debts, approving creditor’s claims, making sure estate taxes are calculated, forms are filed, and tax payments are made, and in all ways assisting the attorney for the estate (which the executor can select)

Ordinarily a PR is not required for long term economic security of assets (but a trustee is)
A PR is one type of fiduciary

Trustees

Usually a trustee is not court-appointed and not court-supervised, like a PR
Trusts are typically outside jurisdiction of the court
Trustee has legal title. Beneficiary has equitable title
With few exceptions, the duties of the trustee are default rules. Your instruments will take precedent, however
A Will/Trust will always trump state law – with a few exceptions

You can waive state law

In many “living trusts,” the creator of the trust (settlor/trustor) names himself as the original trustee who will manage the trust until his death, when it is taken over by a successor trustee
In many “charitable remainder unitrusts,” the trustee must be independent and therefore cannot be the creator of the trust

Guardians

Third type of fiduciary
Appointed by the court to manage the assets of a protected person (usually a minor or incompetent adult)
A person who has been appointed by a judge to take care of a minor child or incompetent adult (both called a “ward”), personally or to manage their affairs
Petition court to appoint the guardian

Person intending to be guardian, another family member, a close friend, or a local official responsible for a minor’s welfare will petition
In the case of a minor, guardianship remains in the court’s supervision until the child is 18
Naming a guardian in a Will in case of death of parent is merely a nomination

The judge doesn’t have to honor that request, but usually does

Often, a parent must petition to become the guardian of a child’s estate if the child inherits/is gifted substantial assets

That is why such gifts should be avoided and trusts should be created instead

Conservator is used in conservatorship instead of the term guardian for cases where the person is appointed to take care of an incompetent or incapable person

Conservators

A guardian and protector appointed by a judge to protect and manage financial affairs and/or the person’s daily life due to physical or mental limitations or old age
Conservator may be only of the “estate” (meaning financial affairs), but also may be of the “person,” when he takes charge of overseeing the daily activities, such as healthcare or living arrangements of the conservatee
The process is that a relative or friend petitions the local court appointment of a specific conservator, with written notice serve on the potential conservatee
The person with the limitation is interviewed by a court-appointed investigator to determine need, desire, and understanding of the potential conservatee as well as the suitability of the proposed conservator
An open hearing is held before the appointment is made
Conservator is required to make regular accountings which must be approved by the court
Conservator may be removed by order of the Court if no longer needed, upon the petition of the conservatee or relatives, or for failure to perform his duties

Custodians
Attorneys-in-Fact

Fourth type of fiduciary
Appointed under Power of Attorney
A fiduciary who is an agent authorized to act on behalf of another person’s property
Someone specifically named another through a written POA to act for that person in the conduct of the appointer’s business
“General Power of Attorney” – the attorney in fact can conduct all business or sign any document
“Special Power of Attorney” – he/she can only sign documents or act in relation to special identified matters
“Durable Power of Attorney” – typically used before death. It is a financial document that is not ambulatory (ambulatory means becoming effective at death through probate). Attorney in fact can do anything they are given the power to do

Living Will – pull the plug provision/what you want if you are on life support
Healthcare Proxy – if you cannot make healthcare decisi