When a person dies, they leave behind all their things, and the amalgamation of all their assets, liabilities and debt is their estate. An estate is not a living or thinking thing. It will not organically manage itself and transfer itself to your surviving next of kin. You need someone to collect all your assets and distribute them to your loved ones after they have settled your outstanding debts and liabilities. Basically, you need someone to administer your estate.
The person you choose can either be an executor, trustee or guardian. They will be your fiduciary. A fiduciary is an individual or entity who will act on behalf of a principal, always prioritizing the principal’s best interests. They must follow your instructions regarding how you want them to manage and distribute the estate when you are gone. The person you appoint has a fiduciary duty to you and your estate.
The duties of a fiduciary
Selecting the right fiduciary is vital because you will not be around anymore to see whether they are fulfilling your wishes. The term fiduciary comes from the Latin language; the words of origin translate to trust. Because the principal entrusts them with their estate, the fiduciary must preserve and value that trust above their own interests. Therefore, a fiduciary has the following duties to the principal:
- Duty of good faith
- Duty of loyalty
- Duty of care
- Duty of prudence
- Duty of confidentiality
They are also responsible for disclosing relevant information concerning the estate to the interested parties, including your heirs, beneficiaries and creditors. Because of their duties, they cannot just do whatever they want with the estate. They must perform their obligations to the estate while continuously upholding their fiduciary duties.
What if you do not appoint a fiduciary?
Estate administration will begin after an estate owner dies. If you do not select a fiduciary before estate administration commences, the Surrogate’s Court in New York will appoint an administrator for your estate. The administrator also has a fiduciary duty to you. However, because you failed to predesignate a fiduciary, you also failed to outline and explain your last wishes. You cannot ensure they will administer the estate however you want them to.
Establishing a comprehensive estate plan early on can allow you to choose your fiduciary and tell them how you want them to administer your estate.