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Familiarize Yourself with Fiduciary Duties

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fiduciary

A fiduciary role is one of the highest, strongest relationships between people. It is a role involving the highest care and the greatest importance. The people you choose to fulfill these roles should be carefully considered; they should be those whom you have the utmost confidence in.

Examples of common fiduciary roles include the executor of your will, trustees of your trusts, guardianships of your children, and agents for your financial and healthcare power of attorney. Other fiduciary roles include attorney, accountant, banker and/or credit union manager.

Often times, people choose corporate executors to remove some of the liability and risk, since corporate executors are familiar with the estate planning process. A corporate executor is going to know the drill. With a corporate executor, you have a true estate planning professional that knows and understands

If you DO choose to name a private individual to a fiduciary role within your estate plan, you need to ensure they are trustworthy, organized, and reliable.

The American Bar Association has comprehensively defined the different fiduciary duties as:

  • Duty of care;
  • Duty of loyalty;
  • Duty to account;
  • Duty of confidentiality;
  • Duty of full disclosure;
  • Duty to act fairly; and
  • Duty of good faith and fair dealing.

Understanding fiduciary duties and selecting the right individuals will help you feel content, secure and satisfied with your estate plan.

Have questions? Need more information?

I would love to discuss your estate plan with you. You can contact me by email at Gordon@gordonfischerlawfirm.com or give me a call at 515-371-6077. Don’t have an estate plan? The best place to start is the Estate Plan Questionnaire.

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Back to School: Spelling Lesson Word of the Day

man reading newspaper

If spelling tests weren’t always your strong suit in school, fear not! Today’s legal word of the day is an easy one that’s having a momentary editorial heyday.

Ripped From the Headlines

As you probably heard, The New York Times took the highly unusual step of publishing an unsigned, anonymous op-ed entitled, “I am Part of the Resistance Inside the Trump Administration.” The person was identified only as follows:

“…. a senior official in the Trump administration whose identity is known to us and whose job would be jeopardized by its disclosure. We believe publishing this essay anonymously is the only way to deliver an important perspective to our readers.”

man with newspaper near train

Whodunnit?

The article led to a nationwide guessing game. Who is the senior official in the Trump administration who penned this “explosive” piece? Suspicion fell onto, of all people, Vice President Mike Pence. This is because the op-ed writer uses the word “lodestar,” and Pence has used this obscure word multiple times. (Pence vehemently denied he was the author, by the way.)

I don’t know who wrote the op-ed, and we may never know, but the real winner out of this news cycle is the word you never knew you needed in your vocabulary—lodestar!

So, What DOES Lodestar Mean?

Lodestar means “a star that leads or guides,” and is especially used in relation to the North Star.

timelapse of stars

Now, Let’s Talk About a Similar Kind of “Star”

At this point you’re like, “Gordon, this is a cool word I can def use in playing Scrabble, but what does it have to do with the law?”

Well, “lodestar” is a synonym and practically interchangeable with the word “polestar,” which is defined as a “directing principle; a guide.”

A court will use the term polestar like so: In this case, our polestar must be this principle . . .

Basically the court will use such-and-such as its guiding principle.

direction sign on a mountain

For example, in the law of wills, the Iowa Supreme Court stated In the Estate of Twedt that “the testator’s [maker of the will’s] intent is the polestar and if expressed must prevail.” You’ll see the same in the law of trusts, the intent of the settlor of a trust must be the polestar.

The word is also used in the law of charitable giving. The intent of the donor is the polestar which courts must follow if there are any issues. For example, suppose a donor posthumously donates $100,000 to a nonprofit, but the nonprofit no longer exists. What was the donor’s intent? Is it stated anywhere what the donor wanted to happen to the charitable funds if the nonprofit was no more? If not written, did the donor discuss the matter with anyone? To resolve any dispute involving a charitable gift, the guiding principle–the polestar–must be the donor’s intent.

Practical application of the Word Polestar

A major reason to have an estate plan is that YOU get to control your own future, rather than being controlled by outside forces or outside events. Through proper estate planning, you can be in total control of the answers to the following questions:

And if there are any questions or issues regarding your estate plan, lawyers and judges looking at your estate plan will make decisions based on YOUR intent. Your intent will be the polestar!

Top 10 Estate Planning Goals

Don’t delay any longer – thank your lucky (North) stars you still have time to make a proper estate plan. I’d be happy to talk with you about your estate plan any time, or you can get started on organizing your important info in my free Estate Plan Questionnaire. I can be reached via email (gordon@gordonfischerlawfirm.com) or by cell (515-371-6077). I’d truly love to hear from you.

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Court Appointed Guardianship: What it is & How to Protect Yourself

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senior citizen guardianship

Recently a friend sent me an article from The New Yorker, “How the Elderly Lose Their Rights.” (While a long read, it’s worthwhile.) The piece focused on the tragic case of a Nevada couple—Rudy and Rennie North—who fell victim to a court appointed guardian who failed (terribly) to put the senior victims’ best interests first and asserted the little known situation where “Guardians can sell the assets and control the lives of senior citizens without their consent—and reap a profit from it.” At first this situation is a bit confusing. How can a couple, with grown adult children, be assigned as wards of a state-appointed conservator/guardian who is then in charge of making health, financial, and social decisions for the individuals?

Given the current and growing population of elderly in the U.S. the issue of court-appointed guardianship it’s an important subject. According to the Census Bureau, “residents age 65 and over grew from 35.0 million in 2000, to 49.2 million in 2016, accounting for 12.4 percent and 15.2 percent of the total population, respectively.” And, between 2000 to 2016, 95.2 percent of all U.S. counties experienced increases in median age.

senior couple at table

What is a Guardian / Conservator?

To be able to protect yourself against such a situation, let’s establish what a guardian and/or conservator actually does and what are the causes for a conservator to be appointed. One person may be both the guardian and conservator and can be combined into a single court action. (Note: these definitions are applicable in the State of Iowa. In some states the words have different definitions and a “guardianship” in Iowa may be considered a “conservatorship” under the verbiage of a different state.)

Iowa Legal Aid offers a clear definition of the two terms:

“In a conservatorship:

  • The court appoints a person (the conservator) to control the property (or estate) of a ward.
  • A conservatorship deals with the person’s financial decisions.

In a guardianship:

  • The court appoints a person (the guardian) to control the person of the ward.
  • A guardianship deals with non-financial decisions such as where the ward lives and what type of medical care the ward gets.”

For simplicity’s sake, for the rest of the article we’ll just say guardian/guardianship, but know that could also include a conservator/conservatorship.

How does a Guardian get Appointed?

A guardian may be appointed if a court finds an individual incapacitated, which can be due to varied conditions like mental disorder, physical or mental disability, chronic abuse of drugs and/or alcohol, or physical illness. Basically if the court is convinced that a person lacks sufficient ability or understanding to communicate or make decisions in their best interest they could appoint a guardian for the continued supervision and care of the individual.

The process is such that a petition is filed in the prospective ward’s state with information regarding the proposed guardian, the guardian and ward’s relationship (if any), and other info on heirs. Any person deemed “competent” can be appointed as a guardian, so that could include an adult child/parent, spouse, or friend. It could also be a professional guardian entirely unrelated to the ward.

two senior citizen women

The legal standing for guardianship immigrated over to the U.S. colonies from England and is based on an English statute that’s survived for over 800 years. The state holds the power of parens patriae, “a duty to act as a parent for those considered too vulnerable to care for themselves.” Because this power is of the states and not federally regulated, there are disparate record keeping standards, sealed court records, and no databases of collective figures at the local, state, nor federal levels.

Potential Dangers of Guardianship

Guardianship in the U.S. straddles a fine line between protection and exploitation.

One of the major tenants of the concept of guardianship is “trust.” And, it’s true that there are great guardians who certainly work in the best interests of their charges. Most people assume the role of a guardian for good reason (like caring for a parent), but there are also substantiated cases where victims (largely senior citizens) were subjected to physical abuse, financial theft, and neglect. In a 2010 report, “Guardianships: Cases of Financial Exploitation, Neglect, and Abuse of Seniors,” the Government Accountability Office identified over 150 reported victims who had suffered a total of $5.4 million in stolen funds.

Guardianship has large potential for issues and consequences given the large quantities of people involved. Currently there over 1.5 million adults who live under the care of a guardian who is either a family member or unrelated professional. These guardians control an immense amount of assets to the tune of $273 billion. It’s also true that in the majority of states there are no qualifications to attain the status of guardian other than taking a course, having not declared bankruptcy recent, and not be convicted felon.

two seniors speaking on sidewalk

The American Bar Association published the statement that “an unknown number of adults languish under guardianship” even if they no longer have the need for someone to make decisions for them (or never did).

Another danger is that while guardianship could be terminated through a court hearing if it can be proved the need no longer exists, the ABA study also asserted the guardianship situation is typically permanent, leaving few ways out for the adults under care. Those who do try to fight against a court-appointed guardian often end up paying excessive amounts of money in attorney and court fees—some even going bankrupt in the process.

Additionally, the aging population of America places increased pressure on court resources which, in turn, can make it difficult for court appointmented guardians to have the optimal high level of oversight necessary. Thus, shady guardians can more easily slip through the cracks and continue to abuse the system and their wards’ assets.

How to Protect Against the Potential

It’s pretty safe to say that no one in their right mind would want a court-appointed guardian (particularly a stranger) to have control over your life. Especially in a way that they could legally:

  • Change your permanent residence to a more restrictive location.
  • Consent to withdraw life-sustain medical procedures.
  • Place restrictions on communications, visit, or interactions with another person.
  • Make decisions contrary to your wishes regarding general life in areas like recreational activities, clothing, and food choices.

As an example of the prospective consequences of these powers is how a guardian placing restrictions on whom their ward can interact with can result in isolating the ward from their family members. According to Elaine Renoire, a director of the National Association to Stop Guardian Abuse, a victims’ rights group, the top complaint she hears about guardians is how they can legally prohibit their wards from seeing or speaking to their loved ones.

senior citizen on bench

The following legal and estate planning tools are proactive measures you can take today to avoid the potential of being subject to court appointed guardianship.

Health Care Power of Attorney

Health care power of attorney is one of the six main documents all Iowans should have as a part of their estate plan. It allows you to choose a designated representative to make medical decisions on your behalf if you are to become incapacitated either temporarily (such as under anesthesia) or permanently. If you cannot express your medical treatment wishes clearly and coherently, your agent could then make such wishes be known on your behalf. The designated agent also retains the right to receive your medical record information that would otherwise be inaccessible as it is protected under HIPAA laws.

Financial Power of Attorney

Similar to the health care power of attorney, financial power of attorney is a legal document that designates someone to handle your financial decisions and take actions like pay bills, settle debts, and sell property on your behalf if you become incapacitated and unable to do this yourself.

Trust

The number of different types of trusts are practically limitless and a trust could be a valuable estate planning protection tool in some situations. A successor trustee could be named and the document could be used as a safeguard for financial protection.

woman walking down street with flowers

Proactivity is Key

By being proactive, you can be certain that someone you love and trust will be responsible with their guardianship powers and big/small life decisions, not the courts. Have these documents crafted by an experienced estate planner (not a DIY website) and keep them up-to-date as circumstances change. Luckily there are smart people in Iowa working toward policy change, such as the National Health Law and Policy (NHLP) Resource Center at the University of Iowa College of Law and their recent task force report citing 232 policy recommendations. But, the road toward substantial policy change is long and it’s best to have your own legal safeguards in place just in case.

Want to discuss guardianship further or get started on your powers of attorney documents? Contact me at any time.

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From a Client: Why we Chose to Hire Gordon Fischer to Create our First Estate Plan

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Although well-meaning, my husband and I are perpetually running late. We are late for everything—missing the first two minutes of a movie, showing up 30 seconds too late to see the balloon drop at a New Year’s Eve party, showing up to a physical therapy session five minutes late… Sound familiar?

When it came to finances, my husband and I managed to keep up on bills and our credit scores were decent, but we were always just doing the minimum to keep our heads above water. Saving enough funds for a couple trips, enough to pay the bills, and maybe throw a couple bucks into long term savings.

There is a game changer in this equation: our daughter.

Photo by Aditya Romansa on Unsplash

She has been the single greatest catalyst in our lives and has forced us to address the facts about sound financials and estate planning. We were especially concerned about the potential for an accident involving both me and my husband.

We decided to create an estate plan with Gordon because we needed reassurance that should anything happen to us, she would be cared for with as minimal amount of legal hiccups as possible.

Gordon set us up with a complete estate plan. It wasn’t nearly as complicated (nor as expensive) as we would have thought.

My husband and I took special care selecting her guardians, should something happen to us, as well as setting up a trust for her to gain access to assets after her 18th birthday.

We plan to revisit the estate plan annually, just to make sure that everything is current. In addition to her college fund, it is our way of taking her financial security seriously and planning for the unexpected. Maybe she’ll forgive us for the chronic lateness she inherited with the knowledge that she has also inherited a strong financial support system in place to help her, no matter what.

Note from Gordon: If you’re like this client (who wished to remain anonymous), children and grandchildren can mean you’ll pursue legal and financial actions you never thought of before to ensure piece of mind that they’ll be taken care of if something happens to you. There’s no harm in giving me a call or shooting me an email to at least talk about what you may need in terms of an individualized estate plan. I look forward to working with you!

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