"Sure, I'll do it. Nothing's ever gonna happen to you anyway, so why should I worry?"
If a friend or family member ever asked you to help in the event of death or disability, what would you say? You might quickly agree, trying to lighten the mood. Talking about death is almost always awkward; combining it with personal financial considerations is even more so.
But agreeing to act as a fiduciary or a caregiver isn't like promising to get your neighbor's mail for a few days. To be ready and able if something happens, you need to have a general idea of what you're being asked to do, and how to get the additional help and information you'll need. With that in mind, here are a few points to consider.
Know your duty
Make sure you understand exactly what your friend or relative expects of you. Will you be an executor or personal representative, responsible for following instructions in a will and distributing assets from an estate shortly after death? Will you be a trustee or successor trustee, taking on responsibility over assets for years to come? Will you be a guardian of children, assuming a full range of long-term parental and legal responsibilities? Or will you be named under a power of attorney, with the potential to be called at a moment's notice to make life-or-death decisions for someone? Without a thorough understanding of what's expected of you, it's impossible for you to consider whether you're able and willing to do the job.
Know your allies
Successfully managing a friend or relative's affairs after death is more than a one-person job. In all but the simplest of cases, you will likely be working with other people to get the job done. For instance, it's very common for someone to want relatives to raise their children while someone else handles their finances. This often allows everyone to focus on the areas in which they can help the most, but there is also a high potential for conflict if everyone can't work together. Before you agree to join the team, make sure that you will be able to handle any disagreements that may arise calmly and rationally.
Similarly, find out whether any professionals are involved. If your friend or relative has an attorney, an accountant, and/or a financial advisor, knowing who they are and how to get in contact with them may save you a lot of eventual trouble. By introducing yourself to those advisors now, they will have a better understanding of how much and what kind of help you will need, if and when the time comes for you to act. They will also provide a valuable second opinion. If you'd typically invest your own funds in a microcap like Ultratech (Nasdaq: UTEK ) , your advisors might recommend a more established company like PepsiCo (NYSE: PEP ) for the funds in your care.
Know your resources
Most fiduciary jobs require legal documentation for you to assume your responsibilities. One of the biggest challenges in implementing an estate plan is often finding the latest valid legal documents. Although storing papers in a safe deposit box provides safety from fire and theft, it can create a difficult situation if the only person on the bank's signature card is deceased or unavailable. It's also essential to keep track of the key to the box.
Those who keep files at home may have huge volumes of papers to go through in order to find the relevant document. Make sure you can find the documents you will need in an emergency. Often, letting a family attorney keep the documents is the best way to provide easy access when they are needed.
Know the whole truth
Legal documents are notorious for obscuring the common-sense intent of the people involved behind a wall of complex jargon. Especially if you'll be acting as a trustee or guardian for children, the documents involved will likely give you extremely broad discretion to make decisions in their best interests.
Your friend or relative is probably choosing you for one of two reasons: Either the person believes that you understand and will follow his or her wishes in providing for the children, or the person respects your own values and believes that you will provide for the children in your own way. In any event, it's important for you to understand why you were chosen for the job. The best way to do so is to talk to your friend or relative now.
Know the latest developments
Once you've figured out everything you need to know, your job doesn't stop. Keep in touch with the person who made the request to ensure that his or her wishes or circumstances don't change over time.
Helping a friend or relative by agreeing to act as a fiduciary or caregiver involves a great deal of responsibility. By giving careful thought to all the ramifications of what is being asked of you, you can be confident that you will provide much-needed help in a time of crisis in a manner that will honor your relationship.
For more on staying prepared for the future, see our recent series on understanding trusts.
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