Updated: December 6, 2024
If you have been asked to act as a trustee or executor, it can be tempting to dive straight in and tackle it yourself. There are a growing number of online platforms on the market that promise to make light work of estate administration. But is self-administration really the best solution?
Trust and estate management and administration involves a delicate balance of financial, legal and tax implications, and it can take a specialist to help you untangle them. In this blog post, we’ll look at the benefits of hiring a fiduciary, or professional agent, compared to going it alone, and why the advantages might well outweigh the initial cost.
A fiduciary manages assets or property on behalf of someone else and, crucially, they must put the other person’s interests ahead of their own. In terms of trust and estate administration, the fiduciary’s role is to manage affairs in accordance with the terms of the trust, the wishes of the deceased, and the interests of the beneficiaries.
As agents, professional fiduciaries bring a wealth of legal, financial and tax expertise to the table. Fully up to speed with the latest regulations, they’re adept at maximizing the value of a trust or estate—whether that’s by managing the assets to reduce the tax burden on the beneficiaries, or realizing a fair market price for any property or valuables that need to be sold. They also understand the importance of great people skills. A good fiduciary will keep the beneficiaries informed at every stage of the process, and head off any potential disputes before they arise.
When you hire a fiduciary, you benefit from all their professional expertise. This presents a number of benefits:
Estate management can be a lengthy process, but fiduciaries hit the ground running. Fully up to date with regulations and best practice, they won’t be thrown off-course by a court filing demand or an unexpected tax obligation. They are also adept at scheduling tasks for maximum efficiency—for example, building in enough time for creditors to come forward without causing any delays.
One of the most compelling arguments for hiring a professional fiduciary is that it prevents bias creeping in. Every trustee or executor has a duty to remain impartial, but it can be harder to avoid sparking a family dispute when you are close to the beneficiaries. A fiduciary will maintain an objective perspective and ensure that the estate is administered fairly and in adherence to the deceased’s wishes.
Estate management is fraught with risk for inexperienced trustees who will be held accountable if the trust experiences significant losses or if they fail to comply with regulations, however inadvertently. Then there’s the specter of beneficiaries raising a complaint of mismanagement. Familiar with the pitfalls and meticulous about record keeping, fiduciaries understand how to manage these risks effectively, and they are protected by public liability insurance in the event of a costly dispute.
Trusts and estates often present a number of complexities, from dealing with probate courts, to filing all the various tax returns on time, to managing different types of assets. A fiduciary will know how to deal with all of these and more—for example, they’ll have plenty of contacts if they need a specialist valuation, as well as some tried and tested strategies for resolving beneficiary disputes.
A fiduciary has a duty to act in the best interests of the estate and its beneficiaries. Here are the qualities to look for when you’re appointing a fiduciary:
How much does it cost to hire a fiduciary? The fees can vary from state to state, and a lot depends on the intricacies of your particular case. As a benchmark, however, you might expect to pay up to 5% of the value of an estate, or two-fifths of 1% of the average annual value of the assets held in an ongoing trust. Some fiduciaries might charge an hourly fee instead.
At first glance, a DIY trust and estates program for a few hundred dollars might look like the better bet. However, it’s often a false economy. Hiring a fiduciary can save significant amounts of money in the long run by avoiding costly mistakes, maximizing the value of the estate and administering the trust more effectively.
Professional fiduciaries can streamline estate administration in a number of different ways. They not only have the experience and expertise to handle the legal and financial complexities of managing an estate, but can also call on other professionals in their network as required. Family members may also see professionals as more impartial, so appointing one can help avoid a lengthy dispute among beneficiaries.
In addition, professional fiduciaries have a suite of digital tools at their fingertips. Platforms such as Estateably help trust and estate professionals simplify the estate administration process with cloud-based solutions such as accounting, instant reporting and document generation. This improves both accuracy and efficiency, leading to a more effortless and streamlined process overall.
In summary, hiring a fiduciary is often the smarter choice. With a deep understanding of financial and legal matters, a fiduciary will make the process more time efficient, maintain objectivity and apply their expertise to the common challenges that can easily trip up a first-timer. You can feel confident they already have access to professional legal software and systems for meticulous record keeping, accounting, and effective estate management. Estateably, for example, is an industry-leading solution designed for modern professionals and fiduciaries.
If you’re struggling to manage the complexities of trust and estate administration, now is the time to consider engaging a professional. Think about your estate’s unique needs and circumstances, and start the search for a reputable fiduciary professional who can best honor the wishes of the deceased.
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