If you have been named as an estate representative, knowing your responsibilities is very important. The following article is a general introduction to your role as a fiduciary. Read it to avoid being challenged, or worse, being sued.
Self-dealing: The first rule of acting as an agent is the rule against self-dealing. Your agent must be told about the clear boundaries early, requiring disclosure and discussion of any possible self-dealing in advance when it comes to your finances.
How to sign/act: One of the mistakes made most often by fiduciaries is failing to sign documents correctly. This can easily be taught and explained. You should always disclose your status as estate representative, i.e., “John Doe, Executor of the Estate of X”.
Money management: If a financial planner is not already involved and your fiduciary has little experience with managing finances, a trusted financial planner can help. All fiduciaries should be briefed on the prudent investor rule, even if it needs to be in the simplest terms possible. You never want a fiduciary to say “I was never told I couldn’t invest in Bitcoin.”
Recordkeeping: The timeframes for required recordkeeping are all the same. There are tips and tricks fiduciaries can use to make recordkeeping easier and minimize questions on any future accounting. The memo line on a check is an agent’s best friend. It can also be used to specify the purpose of any check written. Agents should always have check copies included with bank statements, even if the bank charges an extra fee. Many courts require them with accounting and it can save on hassle and expense later. Check registers have two available lines for each check, one usually shaded in grey. That second line is the perfect place to note what a transaction or check was for to help jog an agent’s memory in the future.
Who the fiduciary is responsible to: A fiduciary must know his or her responsibilities to the various individuals involved in the relationship, whether beneficiaries of an estate or trust or the principal and his or her heirs in the case of a power of attorney.
Contact information should be provided, if available, and the fiduciary should be encouraged to maintain direct contact with these individuals, if feasible.
In certain situations, direct contact between fiduciary and beneficiaries is not in anyone’s best interest, in which case, the fiduciary should be in frequent contact with an experienced attorney who can provide updates to the beneficiaries.
What reports are required/suggested: Each type of fiduciary role has its own accounting requirements. From the simple accounting required by the Social Security Administration to the complicated, detailed accounting required in formal accounting cases by some jurisdictions in guardianships and estates, an agent should be prepared to give detailed reports on income to and withdrawals from all accounts with explanations of each transaction at any time.
To discuss the role of a fiduciary in your NJ estate plan, estate administration, power of attorney, or guardianship matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq., of Hanlon Niemann & Wright, a Freehold Township, Monmouth County NJ Estate Administration Attorney