A fiduciary is an entity with the power and legal obligation to act on behalf of another in situations that require trust, honesty, and loyalty. They must take the utmost care to act in the best interests of the party who has delegated this responsibility.
Fiduciaries can serve in any number of roles in your estate, both before and after your death. Fiduciaries can be accountants, attorneys, bankers, business advisers, financial advisers, mortgage brokers and real estate agents.
Here are some of the most common roles fiduciaries take on when granted this authority.
Executor or Trustee
This fiduciary is responsible for settling your estate following the directions included in your last will and testament. If you die without leaving a will, the court will appoint someone to this position. You can appoint one or more individuals or an institution, such as a bank or trust company.
Executors are charged with gathering your assets and settling your final debts and tax obligations from estate funds, then distributing the remainder of your estate to your beneficiaries. If you don't have a will, they are responsible for ensuring your assets go to your heirs according to state law. Their fiduciary duty is to your beneficiaries as well as to your expressed final wishes.
A trustee is responsible for managing assets that you've placed in a living trust. They must act per the directions you've included in the trust agreement, just as an executor must act following the terms of your will.
In either case, the trustee also has a fiduciary responsibility to your beneficiaries after your death. The role of fiduciary does not end when you pass. It shifts to those who will benefit from your estate, and fiduciaries must put the interests of your beneficiaries first in conjunction with your final wishes.
Health Care Agent
This fiduciary is responsible for making medical decisions on your behalf following directions you've set out in an advance medical directive, also sometimes called a medical power of attorney or durable power of attorney for health care.
Sometimes they'll perform duties like taking you to your doctor appointments, pick up your medication for you, and insure your medications are being managed for you. They can arrange to take care of small issues for you that may seem very overwhelming.
A health care agent can't be an institution or a health care provider who is currently treating you. A health care agent must uphold your written wishes regarding your health care at a time when you're unable to speak them yourself.
In our next post, we'll discuss Fiduciary as Attorney or Agent, as a Pre-Need Guardian, and as Guardian for Minor Children.
A Fiduciary is many things.
They must hold to three primary fiduciary duties:
Duty of care: The fiduciaries must consider all available information in order to take informed action on behalf of the client. This means they must be reasonably informed of alternatives and may solicit input from other advisers and resources.
Duty of loyalty: They must consider the interest of the client and not their own. They may not use their role as a fiduciary in order to benefit themselves.
Duty of good faith: Fiduciaries must employ prudence and care when making personal decisions for the client - in other words, they must act “in good faith.”