Being asked to serve as someone’s Fiduciary is a sign of trust. A parent, spouse, family member, or friend has chosen you to help manage important financial matters when they cannot handle those matters themselves. That can feel like an honor. It can also feel like a lot of responsibility.
Many people named as an Agent in a Financial Power of Attorney, a Successor Trustee of a Trust, or a Personal Representative of a Will, and have never done this before. When the time comes to step into that role, they may be dealing with a loved one’s illness, incapacity, or death while also trying to figure out what bills need to be paid, what accounts they can access, and what records they need to keep.
As a Fiduciary, you are managing money and/or property for your loved one or their beneficiaries. That means following the documents, making careful decisions, keeping good records, and acting in the best interests of the people you are serving.
You are not expected to automatically know how all of that works. Taking things one step at a time and asking for help when something is unclear can make the responsibility feel much more manageable.
Most people who call me have the same first question: Where do I even start?
Start With The Document: POA vs. Trust vs. Will
When you need to start managing the accounts for a loved one, you should first determine who the owner of the account is. The account owner will point you to the necessary legal document and/or process you need to follow to gain access to the account, and the legal document will tell you how to manage the account.
If the account is owned by your loved one individually and they are alive but incapacitated, then you’re going to use the Financial Power of Attorney to access and manage the account.
If the account is only owned by your loved one individually and they have passed away, you are likely going to probate their Will and then use Letters of Authority to access and manage the account.
If the account is in your loved one’s Trust, you’re going to use the Trust or a Certificate of Trust to access and manage the account. You will likely need to have an updated Certificate of Trust prepared by an attorney and may need to obtain a new Taxpayer Identification Number to use for the account instead of your loved one’s Social Security Number.
Keep All The Parties Informed
Every Fiduciary is responsible for both managing assets and communicating with the parties involved. If you are serving as an Agent for your loved one, you should be keeping them informed of the steps you are taking. If you are serving as a Successor Trustee or Personal Representative, you should be keeping the beneficiaries informed.
Under Michigan law, a Successor Trustee must notify all qualified beneficiaries of the Trust within 63 days after accepting the Trusteeship. The notice must include information about their interest in the Trust, an inventory of the assets of the Trust, and information about the ongoing administration.
This is an often-overlooked step when it may initially appear that everyone is getting along. But starting early with open, ongoing, and transparent communication will save you headaches down the road.
Keep the Receipts. Keep the Invoices. Keep Good Records.
As a Fiduciary, you will likely be paying expenses, hiring professionals, maintaining property, traveling on behalf of the Trust, or making distributions. Even if you don’t normally keep receipts, check copies, or statements personally, you should as a Fiduciary.
Your accounting for your loved one, their Trust, or their Estate could be reviewed by them, their beneficiaries, and/or the Probate Court. You should always save receipts and invoices, bank and other account statements, and details about distributions. Someone could have questions a year from now and you cannot be expected to remember why the plumber billed the Trust, or what each payment to the attorney was for. And bank statements alone are not going to provide all the information you might need.
As a Fiduciary, you may need to report on:
- Accounts and balances
- Debts and balances
- Receipt of income
- Payment of expenses
- Distributions to beneficiaries
- Compensation to yourself
It’s much easier to answer questions when you have kept good records from the beginning. You don’t have to create anything complicated. A simple notebook, spreadsheet, or Word document is more than sufficient.
Can a Fiduciary Be Compensated or Reimbursed?
Serving as a Fiduciary can take a considerable amount of time. There may be phone calls, paperwork, property to manage, accounts to organize, bills to pay, tax matters, and communication with beneficiaries.
In Michigan, a Fiduciary may be “fairly and reasonably” compensated for their time and reimbursed for reasonably related expenses. Generally, a Fiduciary is compensated at an hourly rate for actual time spent. You should keep a time log that includes the date, task, and time spent.
If you have to travel while serving as a Fiduciary, you can also be reimbursed for your mileage. You should also keep track of these trips with your time log and reimburse yourself using the applicable IRS Standard Mileage Rate. These rates change at least annually.
Fiduciary compensation is generally considered to be taxable earned income and you should consult with a tax professional about how to handle the reporting of this.
You Do Not Have to Do It Alone.
Serving as a Fiduciary comes with a lot of moving parts, and the details matter.
The best place to start is by understanding which role you are serving in, what documents give you authority, and what records you need to keep along the way. From there, you can make decisions with more confidence and avoid problems that can come from guessing.
If you have been named as an Agent, Successor Trustee, or Personal Representative in Michigan and are unsure of what to do next, Cornerstone Legal can help you review the documents and understand the steps in front of you.
Contact us at 517-708-2222 or email Katrina@CornerstoneLegalPLLC.com.