Navigating Co-Fiduciaries in Estate Planning: Common Issues and Solutions

When setting up your estate plan, choosing the right individuals to serve as your fiduciaries is one of the most critical decisions you’ll make. Fiduciaries are responsible for carrying out your wishes, managing your assets, and ensuring your loved ones are cared for according to your instructions. These roles can include executors for a will, trustees for a trust, or agents under a power of attorney or healthcare directive. Sometimes, you might consider appointing two or more individuals to share these responsibilities. This can be a wise choice, but it also comes with its own set of challenges. Let’s explore the common issues raised by having co-fiduciaries and some recommendations on how to resolve them.

What Are Co-Fiduciaries?

Co-fiduciaries are two or more individuals appointed to serve in the same fiduciary role. For example:

• Co-Executors: Two or more people managing the execution of a will.
• Co-Trustees: Multiple individuals overseeing a trust.
• Co-Agents: More than one person handling power of attorney duties or healthcare decisions.

Having co-fiduciaries can provide checks and balances, distribute the workload, and combine different skill sets. However, it can also lead to conflicts and complications.

Common Issues with Co-Fiduciaries

Decision-Making Conflicts

• Problem: Co-fiduciaries may disagree on decisions regarding asset management, healthcare choices, or distribution of assets.
• Solution: Clearly define how decisions should be made. This can be done by specifying in your documents whether decisions need to be unanimous or if they can be made by majority vote.

Geographical Challenges

• Problem: If co-fiduciaries live in different locations, coordinating meetings and decisions can be difficult.
• Solution: Use technology such as video conferencing, and ensure all parties have access to the same documents and information. Specify in your estate plan how to handle logistical challenges.

Unequal Participation

• Problem: One fiduciary may take on more responsibility than the other(s), leading to resentment or burnout.
• Solution: Clearly outline each fiduciary’s duties and encourage regular communication. Consider appointing a primary fiduciary who has the final say, with the co-fiduciary(s) acting as backups or advisors.

Potential for Conflicts of Interest

• Problem: Co-fiduciaries might have personal interests that conflict with their duties.
• Solution: Choose individuals who are impartial and trustworthy. Include conflict-of-interest clauses in your documents to guide fiduciaries on how to handle potential issues.

Increased Complexity and Costs

• Problem: Managing multiple fiduciaries can complicate the administration process and increase legal costs.
• Solution: Weigh the benefits against the potential costs and complexity. Simplify the process where possible by limiting the number of fiduciaries.

Recommendations for Appointing Co-Fiduciaries

Assess Compatibility

• Choose individuals who have a good working relationship and complementary skills. Consider their ability to communicate and collaborate effectively.

Clearly Define Roles

• Specify the responsibilities of each fiduciary in your estate planning documents. This helps prevent misunderstandings and ensures that all duties are covered.

Provide Clear Instructions

• Leave detailed instructions on how you want your affairs managed. This can include guidelines on how decisions should be made, how disputes should be resolved, and what steps to take in various scenarios.

Consider an Odd Number of Fiduciaries

• If possible, appoint an odd number of fiduciaries to avoid tie votes. This can be particularly useful for decision-making purposes.

Regular Reviews

• Regularly review your estate plan and update it as needed. Changes in relationships, health, or other circumstances can impact your choice of fiduciaries.

Professional Assistance

• Consider appointing a professional fiduciary, such as a trust company or an attorney, to serve alongside or instead of family members. Professionals bring expertise and impartiality to the role.

Choosing the right fiduciaries is crucial to ensuring your estate plan is executed smoothly and according to your wishes. While co-fiduciaries can provide valuable support and oversight, they also bring potential challenges that need careful consideration. By understanding these common issues and following the recommended solutions, you can make informed decisions that will benefit you and your loved ones.

Need help with your estate planning? Contact Edwards Law today to schedule a consultation and ensure your estate plan is comprehensive and effective.