Natural Fiduciaries.

• Author: Allmon, Michael B.
• Position: Certified public accountants and fiduciary duties

CPAs Should Carefully Consider the Pros and Cons

The roots of modern estate planning are embedded in fundamental human emotions expressed by the ancient folk tale of the grateful dead. The myth takes several forms within a number of cultures, but the gist of it is the yearning of people to show gratitude to those they leave behind after they die.

The grateful dead, as the story goes, are those who have found a way to leave legacy or tribute to their earthly friends who have helped them in life.

Of course, when you're dead, you actually have no control, so you select a proxy as executor or trustee--also flown as a fiduciary--to ensure that the value generated by your life energy preserved and your wishes for its distribution accomplished.

Unfortunately, the natural inclination to appoint family members or close personal friends as fiduciaries is often not the best instinct. Estate planners have seen families ripped apart and value lost because clients selected fiduciaries who have a direct interest in the disposition of their estate's assets.

That's why good advisers recommend that clients choose is interested parties, preferably financial or legal professionals, to fulfill fiduciary duties.

The Best Fit

CPAs fit the fiduciary role best because their backgrounds in tax preparation, a accounting and financial planning, as well as their excellent judgment and a natural aversion to risk, makes them prudent administrators.

These are important considerations for people who want to ensure that their estates or trusts will result in desired payout levels to heirs or beneficiaries. They understand that family embers or friends usually are ill-prepared to undertake these roles because of the complexities as well as personal interests that can cloud judgment.

Executors or trustees are fiduciaries--agents legally responsible for managing property for the benefit of another individual or a group. Their principal duties include marshaling and valuing assets, keeping those assets productive, paying the estate or trust's bills, preparing an investment plan (including an investment policy), and preparing tax returns.

CPAs excel in all of these areas. Still, a CPA shouldn't rush into accepting the role of executor or trustee without first considering the pros and cons.

In Favor

Here are some of the reasons CPAs make good executors:

Trusted Adviser: Clients usually see CPAs as their most reliable advisers. It's therefore a natural step for them to see CPAs as...