By Isabella Campbell
You may hear the term “fiduciary” mentioned by your lawyer, financial advisor, bank, or friends/ family. Although some have a general concept of what the term means in the corporate or business context, many remain unaware of what the term encompasses and implies in the estate-planning world. Understanding the term and the depth of obligation it entails is an essential element to the estate-planning process.
A fiduciary duty “refers to the relationship between a fiduciary and the principal or beneficiary on whose behalf the fiduciary acts.” When consulting with your lawyer in the estate planning context, you as the principal will be asked to select individuals to serve as your various fiduciaries. For example, the personal representative (or executor) of your Will qualifies as a fiduciary. Additionally, a trustee, guardian, power of attorney, or medical agent all serve as fiduciaries. In many ways, a fiduciary acts as an extension of you – which makes cautiously selecting the individual you wish to name as a fiduciary all that much more important.
What many remain unaware of is the standard of care that a fiduciary owes to the principal. Although appointing someone in a fiduciary role is often considered “honorary” and indicative of a trusting relationship, it also bestows a great deal of obligation onto the fiduciary. Often, fiduciary duties are divided into two categories: the duty of loyalty and the duty of care. A fiduciary must always act in your best interest, or in the best interest of the beneficiaries. This remains true even if a fiduciary’s view does not align with your own wishes or core values. Although the specific tasks a fiduciary performs varies on the appointed role, a fiduciary must always maintain the highest level of care. Should the fiduciary breach his or her legal obligations (duty of loyalty and duty of care), the fiduciary may face civil or disciplinary action.
Therefore, before appointing someone in a fiduciary role in your estate planning documents, consider the scope of that person’s expected duties and responsibilities. It may be helpful to have a conversation with the individual(s) you are considering nominating and understand their stance on serving in the role. To your surprise, the individuals closest to you may not be the most qualified to serve as a fiduciary.
At Legacy Planning and Probate, we urge our clients to plan for tomorrow, today. What other questions do you have about the legal term “fiduciary”? Are you ready to get started naming your estate’s fiduciary? Be sure to contact us through the website with your questions or to start the process.
LP&P wishes Isabella the best as she completes her internship with us. Isabella is a recent graduate of the University of Denver Strum College of Law, where she was a Staff Editor for the Denver Journal of International Law and Policy, founding m ember of DU’s If/When/How Chapter, and a Tribal Wills Program Participant.