In estate planning, fiduciaries play a critical role in managing and administering various aspects of an estate, trust, or financial arrangement on behalf of someone else. These fiduciaries have a legal duty to act in the best interest of the person or entity they are representing.

Here are the main types of fiduciaries commonly used in estate planning:

Executor (Personal Representative)

Trustee

Guardian for Minor Child

Agent under Power of Attorney

Health Care Proxy (Medical Representative)

Executor (Personal Representative)

The executor is responsible for managing and distributing the estate of a deceased person according to the terms of the will. If there is no will, this role is filled by an Administrator appointed by the courts. The Administrator’s job is to manage the estate according to state intestacy laws. Both an Executor and Administrator must act in the best interests of the estate and its beneficiaries, handling the estate’s assets prudently.

Key Responsibilities Include:

• File the will with the Surrogate’s Court.
• Inventory the assets of the estate.
• Accumulate and protect the assets, investing them when appropriate.
• Pay any outstanding debts and taxes of the estate.
• Keep detailed records of all activities and account for all actions taken as required by law.
• Distribute the remaining assets to the beneficiaries at the appropriate time.
• Manage the estate through the probate process, ensuring all legal requirements are fulfilled.

Who can be an Executor?

In New Jersey, the requirements for serving as an executor are similar to those in many other states, but there are a few nuances specific to New Jersey law. Here’s an overview of the key requirements for executors in New Jersey:

1. Basic Legal Requirements

Age: The executor must be at least 18 years old in New Jersey. However, practically speaking, an 18-year-old is often too young to perform the job and older, more experienced persons should be considered.

Mental Competence: The person must be of sound mind and capable of managing the responsibilities of an executor.

Felony Convictions: New Jersey does not have a specific prohibition against felons serving as executors, but the court may still disqualify someone if they are deemed unfit for the role due to criminal history.

2. Residency Requirements

In New Jersey, non-resident executors are allowed to serve, but there are additional requirements. A non-resident executor must appoint a New Jersey resident as an “agent” to accept legal papers on their behalf (this could be an attorney or another person). This requirement ensures that legal matters related to the estate can be efficiently handled within the state.

3. Who Can Serve

Family Members: As in most states, family members such as a spouse, adult child, or sibling are commonly appointed as executors.

Friends: Trusted friends can serve if they meet the other legal requirements.

Professional Executors: If necessary, the testator (the person making the will) can appoint a professional such as an attorney, accountant, or bank to serve as executor. Naming a professional executor often makes sense when the job is too complicated for a friend or relative, or when conflicts within the family threaten the overall administration.

Corporate Executors: New Jersey also allows corporations authorized to act as fiduciaries (such as banks or trust companies) to serve as executors.

Co-Executors: New Jersey permits the appointment of co-executors. This means that multiple individuals can share the responsibility of administering the estate. This can be helpful in larger or more complex estates, or when a person wants to involve multiple family members in the process. However, naming multiple executors is not always a good idea.

4. Bond Requirement

In New Jersey, unless the will waives the requirement, an executor is typically required to post a bond to protect the estate and beneficiaries against any mishandling of estate assets. However, family members who serve as executors are often excused from this requirement if the will expressly waives the bond. Non-family members or non-resident executors may be required to post a bond unless waived in the will. Bond is almost always required if a person dies without a Will and the appointment of an Administrator is necessary.

5. Fiduciary Duty

Like all executors, those in New Jersey are considered fiduciaries, meaning they have a legal duty to act in the best interests of the estate and the beneficiaries. They are required to follow the terms of the will, settle debts and taxes, and distribute assets appropriately.

6. Disqualification

A New Jersey court can disqualify someone from serving as an executor if they are found to be unfit, which may include:

• A conflict of interest.
• Inability to fulfill the responsibilities (due to mental or physical incapacity).
• Evidence of dishonesty or fraud.
• Even if a person is named as an executor in a will, they can decline the role. In that case, a successor executor or an administrator will be appointed.

7. Surrogates’ Court Oversight

In New Jersey, the probate process and oversight of executors typically occurs in the county Surrogates’ Court. The court ensures that the executor is properly managing the estate, and beneficiaries can seek redress in the Surrogates’ Court if there are concerns about the executor’s conduct.

Trustee

The trustee manages and administers the assets held in a trust. The trust can be set up during the settlor’s lifetime (living trust) or after death (testamentary trust). A trustee must follow the terms of the trust document, act in good faith, and prioritize the interests of the beneficiaries over their own

Key Responsibilities Include:

• Invest and manage the trust assets according to the trust’s terms and applicable laws.
• Distribute assets or income from the trust to the beneficiaries, as outlined in the trust document.
• Maintain proper records and communicate with beneficiaries.

Who can be a Trustee?

The requirements for who can serve as a trustee in New Jersey are relatively flexible, but there are some key considerations and legal requirements to keep in mind.

In New Jersey, a trustee is the person or entity responsible for managing and administering a trust according to its terms and in the best interests of the beneficiaries. The role of a trustee is a fiduciary one, meaning the trustee must act with loyalty, care, and diligence on behalf of the beneficiaries of the trust. The requirements for who can serve as a trustee in New Jersey are relatively flexible, but there are some key considerations and legal requirements to keep in mind.

1. Basic Requirements for Trustees in New Jersey

Age: A trustee must be at least 18 years old to legally serve in New Jersey.

Mental Competence: The trustee must be of sound mind, capable of managing the responsibilities of the trust, and able to act in the best interests of the beneficiaries.

Legal Standing: The trustee must be legally capable of holding and managing property, meaning they cannot be under any legal disability that would prevent them from fulfilling their duties.

2. Who Can Serve as a Trustee?

Individual Trustees: Any competent adult, including family members, friends, or trusted advisors, can serve as a trustee in New Jersey. The person chosen should be someone who is capable of managing the trust’s assets and acting in the best interests of the beneficiaries.

Family Members: A family member, such as a spouse, adult child, sibling, or other relative, is often appointed as a trustee, particularly in family trusts.

Friends or Advisors: A close friend or trusted advisor can also be appointed, especially if they have financial or legal experience.

Corporate Trustees: New Jersey allows banks, trust companies, and other financial institutions authorized to conduct fiduciary activities to serve as trustees. A corporate trustee is often selected for large or complex trusts where professional management of assets is required.

Banks or Trust Companies: These institutions can offer professional trust management services, including investment management, tax filing, and distribution of trust assets.

Law Firms or Attorneys: In some cases, an attorney or law firm specializing in estate planning may be appointed as a trustee, especially when legal expertise is important.

Co-Trustees: A grantor or settlor (the person who creates the trust) can appoint more than one trustee to serve as co-trustees, allowing them to share responsibility for managing the trust. This approach can be useful if different people bring unique skills to the role (e.g., one has financial expertise, while another understands the needs of the beneficiaries).

When selecting a trustee, it’s essential to choose someone who is trustworthy, capable of managing the trust assets, and willing to take on the significant responsibilities that come with the role.

3. Non-Resident Trustees

In New Jersey, non-resident individuals can serve as trustees. However, as with executors, some additional requirements may apply if the trustee is not a New Jersey resident.

A non-resident trustee may need to appoint a local agent to accept legal notices or service of process on behalf of the trust.

If a non-resident trustee is appointed, it may be more challenging to administer the trust efficiently, so some grantors prefer appointing trustees who live in New Jersey or who have easy access to local resources.

4. Trustee Requirements for Special Types of Trusts

Special Needs Trust: For trusts created to benefit a person with special needs, the trustee must be particularly careful to ensure that the trust’s administration does not interfere with the beneficiary’s eligibility for government benefits (e.g., Medicaid or Supplemental Security Income). In some cases, professionals with expertise in this area may be preferred as trustees.

Charitable Trust: For charitable trusts, the trustee must have the ability to manage the assets effectively and ensure that they are distributed to appropriate charitable beneficiaries. In such cases, a professional or institutional trustee may be appointed for proper asset management and compliance with legal requirements.

5. Bond Requirements

In some cases, New Jersey law may require a trustee to post a bond, which is a form of insurance protecting the beneficiaries from any potential mismanagement or fraud. However, this requirement can be waived in the trust document. In practice, bond requirements are more commonly applied when the trustee is a non-family member or someone without a significant personal connection to the beneficiaries.

6. Duties of a Trustee in New Jersey

A trustee in New Jersey has several important fiduciary duties, which include:

• Duty of Loyalty: The trustee must act solely in the best interests of the beneficiaries, avoiding conflicts of interest and ensuring that the trust’s purpose is fulfilled.
• Duty of Prudence: The trustee must manage and invest the trust assets responsibly, following New Jersey’s Prudent Investor Act, which requires the trustee to make sound investment decisions.
• Duty of Impartiality: The trustee must treat all beneficiaries fairly and impartially, especially when there are multiple beneficiaries with competing interests (e.g., income beneficiaries vs. remainder beneficiaries).
• Duty to Account: The trustee must keep accurate records of all trust activities and provide regular accounting to the beneficiaries as required by the trust document or state law.

7. Removal of a Trustee

New Jersey law allows for the removal of a trustee if they are failing to fulfill their duties or acting inappropriately. Beneficiaries or co-trustees can petition the court for removal if the trustee breaches their fiduciary duties, mismanages the trust, or becomes incapacitated. A successor trustee can be appointed to continue the administration of the trust.

8. Successor Trustees

A successor trustee is a person or entity named in the trust document to take over the role of trustee in the event that the original trustee can no longer serve (due to death, resignation, or incapacity). The trust document typically specifies who the successor trustees will be, and they must meet the same basic legal requirements as the original trustee.

Guardian For Minor Child

A guardian is appointed to take care of the physical and/or financial well-being of a minor child. The responsibilities include providing for their education, healthcare, and general welfare. A guardian is legally obligated to act in the best interest of the minor or incapacitated person, making decisions in their favor.

Key Responsibilities Include:

• Provide food, shelter, clothing, healthcare, education, and overall well-being for the minor child.
• They must act in the child’s best interests and make decisions regarding the child’s upbringing.

Who can be a Guardian?

Under New Jersey law, a testator can name the guardian or guardians in their will that they would like in the event of their death. Naming a guardian is a primary reason why individuals with young children need wills.

1. Basic Requirements for Guardianship in New Jersey

Age: The guardian must be at least 18 years old.

Mental Competence: The individual appointed as a guardian must be of sound mind and capable of fulfilling the responsibilities associated with guardianship.

Residency: There is no legal requirement that a guardian must be a resident of New Jersey, but practical considerations may favor local guardianship. Courts may impose additional requirements, such as posting a bond, for non-resident guardians.

No Criminal History: While a criminal record does not automatically disqualify someone from becoming a guardian, a person with a history of abuse, neglect, or certain felonies (such as fraud or theft) may be disqualified. The court may conduct background checks to ensure the person is fit to serve as a guardian.

2. Who Can Be Appointed as a Guardian for a Minor?

Parents’ Choice: If parents have made a designation of who they wish to serve as the guardian of their minor children in their will, the court typically gives significant weight to their wishes unless there is a compelling reason not to follow that choice (e.g., the named person is unable or unwilling to serve).

Family Members: If no guardian is named in a will, family members such as grandparents, aunts, uncles, or adult siblings are often considered first. Courts prioritize relatives because of their existing relationships with the child.

Friends or Trusted Individuals: If no family member is suitable or willing, a trusted friend or other individual known to the child or family can be appointed. The court must determine that the person is capable and in the child’s best interests.

Foster Parents or Legal Guardians: In some cases, if a child has been in foster care, the foster parents or an individual who has already been acting in a parental role may be named as the permanent legal guardian. The court’s primary focus in appointing a guardian for a minor is the best interests of the child. This means the court will consider the guardian’s ability to provide for the child’s physical and emotional needs, education, healthcare, and general welfare.

3. Co-Guardians

The court can appoint co-guardians, which means that two or more individuals share the responsibilities of guardianship. Co-guardians are often appointed in cases where parents or multiple family members wish to jointly manage the care of the child or incapacitated adult. The court requires co-guardians to work together in making decisions for the person under their care.

4. Special Considerations

5. Removal of a Guardian

A guardian in New Jersey can be removed by the court if they fail to fulfill their duties, abuse their authority, or are no longer capable of providing care. Interested parties, such as family members or a state agency, can petition the court to remove a guardian if they believe it is in the best interest of the person under guardianship.

Agent Under Power of Attorney

In New Jersey, an agent under a Power of Attorney (POA) is a person authorized to act on behalf of another individual (the principal) in legal and financial matters. The agent (also known as an “attorney-in-fact”) is given authority through a written POA document, and their duties and powers are defined by the terms of that document. The agent must act in the principal’s best interests, avoid conflicts of interest, and follow the instructions set forth in the POA document.

Key Responsibilities Include:

• Manage the principal’s financial affairs, such as paying bills, managing investments, or handling real estate transactions.
• Paying taxes
• When authorized to make gifts, the Agent must determine that such gifting is authorized by the POA and in the principal’s best interest.
• Keeping records of all transactions and accounting for all actions taken.

Who can be an Agent?

The principal’s choice of an agent should be based on trust, reliability, and the agent’s ability to manage the tasks that the POA will assign to them, ensuring that the principal’s affairs are handled appropriately and efficiently. Here’s an overview of who can serve as an agent under a POA in New Jersey:

1. Basic Requirements for Agents in New Jersey

Age: The agent must be at least 18 years old.

Mental Competence: The agent must be mentally competent and capable of managing the responsibilities assigned to them under the POA.

Trustworthiness: The individual must be someone the principal trusts to act in their best interests, manage their affairs responsibly, and carry out the principal’s wishes as outlined in the POA document.

2. Who Can Be Appointed as an Agent?

In most cases, the person named as Executor will also be the appropriate choice as Agent.

3. Non-Residents as Agents

In New Jersey, a non-resident can serve as an agent under a POA. However, practical considerations should be taken into account, such as whether the non-resident can easily manage the principal’s affairs from another state or country.

There are no specific legal restrictions on non-residents serving as agents, but it’s important for the agent to be readily accessible and able to carry out their duties when needed.

4. Multiple Agents (Co-Agents)

New Jersey allows for the appointment of multiple agents under a POA. The principal can designate two or more individuals to act together or independently. When co-agents are appointed, the POA document must specify how decisions are to be made:

Jointly: Co-agents must agree on decisions and act together.

Independently: Each agent can act separately and make decisions without the approval of the other(s).

While appointing multiple agents can be useful, it can also lead to conflicts or inefficiencies if co-agents disagree on how to proceed.

5. Successor Agents

The principal can also name successor agents in the POA document. A successor agent will take over if the originally appointed agent can no longer serve due to incapacity, death, resignation, or unwillingness to act. This ensures that there is a clear line of succession for decision-making.

6. Agent’s Duties and Responsibilities

An agent under a POA in New Jersey has fiduciary duties, meaning they must act in the best interest of the principal, handle their affairs prudently, and avoid conflicts of interest. The specific responsibilities of the agent depend on the type of POA and the authority granted in the document. These can include:

• Financial POA: The agent may handle financial matters such as paying bills, managing investments, collecting income, filing taxes, and managing real estate.
• Real Estate POA: This POA is usually restricted to the actions necessary to dispose of a particular piece of real estate.
• Durable vs. Non-Durable POA: In a durable POA, the agent’s authority continues even if the principal becomes incapacitated, whereas a non-durable POA terminates if the principal is no longer competent. All POAs for estate planning purposes should be durable.

7. Legal Considerations and Disqualification

No Felony Convictions: While there is no strict prohibition against individuals with a criminal record serving as an agent, it is generally unwise to appoint someone with a history of fraud, theft, or dishonesty. The court can intervene if there is evidence that the agent is unfit to serve.

Conflict of Interest: The agent should not have significant conflicts of interest that could prevent them from acting solely in the principal’s best interests. For example, appointing someone who stands to personally benefit from decisions they make as an agent could create a conflict.

Inability to Serve: If the agent is unable or unwilling to fulfill their duties, the POA may specify a successor or the court may intervene to appoint a guardian or conservator.

8. Revocation of a Power of Attorney

The principal can revoke the POA at any time, as long as they are mentally competent to do so. This is typically done by executing a revocation document and providing notice to the agent and relevant financial institutions. If the principal becomes incapacitated, the POA remains in effect unless it is a non-durable POA.

9. Court Oversight

In cases where the agent under a POA is suspected of mismanaging the principal’s affairs or acting against their best interests, interested parties (such as family members or the principal themselves) can petition the court to intervene. The court can revoke the agent’s authority or appoint a guardian or conservator if necessary.

Health Care Proxy (Medical Representative)

A healthcare proxy is a fiduciary designated to make healthcare decisions on behalf of an individual if they become incapacitated and unable to make such decisions themselves. They must act in the best interest of the individual, using their knowledge of the person’s wishes or making decisions aligned with their welfare.

Key Responsibilities Include:

• Make medical decisions based on the individual’s wishes, or in their best interest if their wishes are not known.
• Communicate with healthcare providers and ensure that the person’s medical care is carried out properly.

Who can be a Health Care Proxy?

In New Jersey, a health care proxy (also known as a health care agent or surrogate or representative) is a person appointed to make medical decisions on behalf of another individual (the principal) if they are unable to do so themselves due to incapacity. The health care proxy is designated through an Advance Directive for Health Care and sometimes a Living Will. Here are the guidelines and requirements for who can serve as a health care proxy in New Jersey:

1. Basic Requirements for a Health Care Proxy in New Jersey

Age: The health care proxy must be at least 18 years old.

Mental Competence: The proxy must be of sound mind and capable of understanding and making healthcare decisions in accordance with the principal’s wishes.

Willingness and Availability: The proxy should be someone who is willing to take on the responsibility and is available to act when needed. They must be able to communicate effectively with healthcare providers and the principal’s family if necessary.

2. Who Can Serve as a Health Care Proxy?

Family Members:

The most common choice for a health care proxy is a close family member, such as a spouse, adult child, sibling, or parent. Family members are often chosen because they are familiar with the principal’s values, wishes, and medical history.

Trusted Friends: If the principal does not have a suitable family member, a trusted friend can be appointed. The key is selecting someone who understands the principal’s healthcare preferences and is capable of making important decisions under pressure.

Other Individuals: In some cases, individuals may appoint someone outside of their immediate circle of family or friends. This could be a mentor, colleague, or another person who understands their medical wishes and can act on their behalf.

3. Non-Residents as Health Care Proxies

In New Jersey, there is no residency requirement for a health care proxy. Non-residents can serve in this role, but practical considerations should be taken into account. The proxy should be available to quickly make decisions or travel if necessary to meet with healthcare providers in person.

Non-resident health care proxies should be reachable by phone or other means of communication in emergencies to ensure they can respond promptly.

4. Successor Health Care Proxies

The principal can name successor health care proxies in the Advance Directive. A successor will take over if the primary proxy is unable or unwilling to act. This ensures continuity in decision-making if the first person named cannot fulfill the role.

It’s advisable to name at least one successor proxy in case the first choice is unavailable when needed.

5. Co-Proxies

New Jersey allows for the appointment of co-proxies, meaning more than one person can be named to make health care decisions. However, this is often a bad idea and doing so can lead to complications if the co-proxies do not agree on the course of action.

Medical providers prefer to look to one individual for health care decisions. Also, treatment may be delayed if one health care representative is unavailable or if the health care representatives disagree. In the event of a disagreement between multiple representatives, the health care provider may act on its own, or seek court intervention.

It is usually recommended to appoint just one person as the health care proxy to avoid potential conflicts, but if co-proxies are appointed, the Advance Directive should specify how disagreements will be resolved.

6. Who Should NOT Be a Health Care Proxy?

Healthcare Providers: In New Jersey, a physician or healthcare provider involved in the care of the principal generally cannot be named as a health care proxy, unless they are a family member. This helps prevent conflicts of interest.

Conflict of Interest: It is generally advisable to avoid naming anyone who may have a conflict of interest or whose personal interests may not align with the principal’s healthcare wishes. For example, someone who stands to gain financially from the principal’s estate may not be the best choice if their decisions might be influenced by personal motives.

Untrustworthy or Unreliable Individuals: The principal should avoid appointing someone who has proven to be unreliable, or who may have difficulty making difficult decisions under stress.

7. Duties and Responsibilities of a Health Care Proxy

A health care proxy in New Jersey has the following responsibilities:

Make Medical Decisions: The proxy makes medical decisions on behalf of the principal if they are incapacitated and unable to communicate their own wishes. These decisions include consenting to or refusing medical treatments, surgeries, medications, and other healthcare interventions.

Follow the Principal’s Wishes: The proxy must follow any instructions the principal has outlined in their Advance Directive or Living Will. If no specific instructions are given, the proxy should make decisions based on their understanding of the principal’s values, preferences, and best interests.

Work with Medical Providers: The proxy must communicate with doctors, nurses, and other healthcare professionals to ensure the principal receives care in line with their wishes. The proxy has the legal authority to access the principal’s medical records and discuss their care with healthcare providers.

End-of-Life Decisions: The health care proxy may need to make difficult decisions about life-sustaining treatments, including the use of ventilators, feeding tubes, and do-not-resuscitate (DNR) orders. The proxy should be prepared to make these decisions in line with the principal’s instructions or known preferences.

8. Choosing a Health Care Proxy

When selecting a health care proxy, the principal should consider the following:

Trustworthiness: The person chosen must be trustworthy and able to carry out the principal’s wishes, even if those wishes are difficult or controversial (such as withdrawing life support).

Ability to Handle Stress: Medical decisions, especially those made during a crisis, can be emotionally taxing. The proxy should be someone who can remain calm under pressure and make clear-headed decisions.

Communication Skills: The proxy must be able to effectively communicate with healthcare providers, the principal’s family, and others involved in the decision-making process.

Understanding of Medical Preferences: Ideally, the proxy should be someone who has discussed the principal’s medical preferences with them in advance and understands their values, such as preferences about end-of-life care, palliative treatments, and quality of life.

9. Revocation of Health Care Proxy

The principal can revoke the appointment of their health care proxy at any time, as long as they are mentally competent to do so. This is typically done by executing a written revocation and informing the current proxy, any successor proxies, and healthcare providers.

Additionally, if the principal creates a new Advance Directive appointing a different person as the proxy, the previous proxy designation is automatically revoked.

Conclusion

Naming trustworthy individuals as fiduciaries in estate planning ensures that they will manage and distribute assets according to your wishes. A well-chosen fiduciary will safeguard your estate, make sound financial decisions, and handle legal obligations responsibly. Selecting the right people protects beneficiaries and minimizes conflicts during the administration process. Contact us to learn more about the importance of these fiduciary roles in your estate plan.