Beneficiaries & Fiduciaries: Understand These Key Roles in Estate Planning

Discover how beneficiaries and fiduciaries fit into your estate plan.

Estate planning is a complex process made easier by being broken down into small steps. After learning what is involved in estate planning, taking some initial steps to organize your thoughts and paperwork, and learning about the key terms and documents, you are ready to consider beneficiaries and fiduciaries.

Choosing the people who will receive your property (beneficiaries) after you die and choosing a person to carry out your wishes (a fiduciary) can be difficult. These are big decisions that can affect the end of your life and the lives of those you love. Financial decisions based on facts rather than emotions generally work out best. To add to your estate planning knowledge base, let’s look at the roles and responsibilities of beneficiaries and fiduciaries and how they fit into your estate plan.

Who Are Beneficiaries?

Beneficiaries are the people you choose to receive assets from your estate. You can name separate beneficiaries on your life insurance policy, trust, and will. The beneficiaries you choose can be relatives, friends, colleagues, or complete strangers. You may also require that your beneficiaries reach a certain age or milestone (marriage, college graduation, professional accomplishment) before property is distributed to them. Alternatively, you may want to leave all or part of your estate to your alma mater, a favorite charity, a museum, or your business. It is your decision.

Who Are Fiduciaries?

Fiduciaries are people who have a legal and financial duty to act in your best interest. You may appoint various fiduciaries to ensure your wishes are carried out. Different types of fiduciaries have different responsibilities.

  • Executor: The executor of your will settles your estate according to your directions outlined in your will. They collect your assets, pay debts, and distribute remaining funds, among other duties. Your executor will work with the court, representing your interests, when your estate goes through probate.
  • Trustee: A trustee can be a person or organization you choose to manage a trust. A trustee controls and invests trust assets and distributes benefits. Trustee is a long-term role that can last for several years, depending on the terms of the trust. More than one trustee may be chosen to work in succession.
  • Guardian: A guardian, also known as a conservator, is legally responsible to manage the well-being or finances of a conservatee or ward. A guardian must act in the best interests of the conservatee, usually a minor child or someone who is unable to care for themselves. A guardian may receive the conservatee’s state and federal benefits and have control of their finances or the property left to them in a will. Or a guardian could be responsible for the well-being of the conservatee, and a trustee can be appointed to manage their finances. A guardian’s role may end when the conservatee turns 18 or 21 (depending on state law).
  • Agent: An agent is a person you appoint to act on your behalf in legal, financial, and medical matters when you can’t. Your agent acts on your behalf under a power of attorney, while you are alive but incapacitated, to handle assets that are both in and outside of your trust. You can give your agent broad or limited authority depending on your circumstances and preference. Most people choose a family member to be their agent.

How to Choose Fiduciaries

Deciding who should execute your will, administer your trust, raise your children, and make decisions for you if you can’t is not easy. When choosing fiduciaries, think about the responsibilities they will carry out. A trustee, for example, needs to have the financial and legal knowledge to manage your trust. A guardian should have some experience caring for children.

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