Estate Planning — Can I name an out-of-state fiduciary?
By Attorney Jennifer D. Kahl, February 21, 2022.
When discussing estate planning with my clients, they frequently ask me if they can name an out-of-state individual as their fiduciary. Since fiduciary selection is so important, it is crucial that you understand all of your options.
What is a fiduciary?
A “fiduciary” is someone who has the legal authority to act in the place of another person. The person for whom the fiduciary is acting is called the principal. A fiduciary has various legal duties toward the principal, including the duty to act in the principal’s best interest. Here are some examples of fiduciaries:
- The person appointed under a Medicaid Power of Attorney is called an “agent” or a “healthcare proxy.
- The person appointed under a Property Power of Attorney is called an “attorney-in-fact,” or simply an “agent.”
- The person nominated as Person Representative in a Will is called an “executor.”
- The person appointed to manage assets under a trust agreement is called a “trustee.”
Who can be a fiduciary?
A principal can appoint an individual or an entity to be a fiduciary. Individuals are usually family members, trusted friends, or professional advisors like CPAs or lawyers. Entities that serve as fiduciaries are banks, trust companies, or law firms. Visit here for more discussion about these options.
Can I appoint an out-of-state fiduciary?
Yes. You can appoint any individual as your fiduciary. However, there are some limitations that you should be aware of.
- Your medical agent is someone who makes medical decisions on your behalf. This may include selecting your doctors, directing your treatment, hiring home care givers, or selecting an assisted living facility or nursing home where you will live. If you need regular attention and care, it will be difficult for an out-of-state agent to do his job. It is usually much easier to select someone local. However, I realize that this isn’t an option for everyone. Out-of-state medical agents may benefit greatly from hiring a professional care manager to monitor your care.
- Your agent under power of attorney should be someone who you can trust with your money. Pick the person you trust the most, regardless of where he or she lives. Because most banking can be done online now, location is less critical. However, the risk of exploitation at the hands of a dishonest financial agent is unfortunately high. Therefore, you should consider trustworthiness and financial literacy above geographic proximity.
- Financial literacy and trustworthiness are the most important factors when selecting an executor. In general, an executor only needs to be physically present in Virginia at the time of his or her court qualification. After that, nearly all executor duties can be handled remotely by hiring local professionals. However, a non-Virginian executor will need to have a Virginian serve as his or her “resident agent.” The resident agent is the individual appointed to accept personal service on behalf of the executor if someone is trying to the sue the executor. Generally, the attorney that you hire to help you with the estate process will serve as your resident agent. Additionally, a non-Virginia executor will need to post a bond at the time of qualification. The bond is basically an insurance policy to protect the estate in case something happens to the executor (i.e. he dies before the estate is settled or he runs off with the money). Virginian executors can often avoid the bond requirement if the Will specifically waives it; non-Virginians must always post the bond, regardless of what the Will says.
- As with the power of attorney agent and the executor, financial literacy and trustworthiness are the most important factors when selecting your trustee. If you have created and properly funded a living trust, your trustee will not be subject to the resident agent or bond requirements.
Conclusion
In my opinion, geographic location is only a significant factor when selecting a medical agent. The other roles are primarily concerned with your assets, not your body. Today, most of your assets will be available for virtual management, making geographic proximity less of an issue. Therefore, when selecting your financial fiduciaries, keep it simple: just pick the best person for the job.