What is a Fiduciary?
A fiduciary is a person or organization that acts on behalf of another person, putting their client’s interest ahead of their own, with a duty to preserve good faith and trust. Fiduciaries are trusted to manage money or property for someone else and must act with a high standard of care. Here’s what you need to know about fiduciaries:
Responsibilities of a Fiduciary
- Acting in the Best Interest: A fiduciary must prioritize their client’s needs above their own. This includes making decisions that benefit the client and not taking any actions that would harm the client financially or otherwise.
- Duty of Loyalty and Care: Fiduciaries must be loyal to their clients and exercise a high degree of care in managing their affairs. They must avoid conflicts of interest and act with the same care, skill, and diligence that a prudent person would use.
- Transparency and Honesty: A fiduciary must be transparent in their dealings and provide honest, accurate information to the client. This includes keeping detailed records of all transactions and being open about any potential conflicts of interest.
- Confidentiality: Fiduciaries must protect the confidentiality of the client’s information. They are responsible for ensuring that sensitive financial or personal information is not disclosed to unauthorized individuals.
- Accountability: Fiduciaries are accountable for their actions. They must provide regular updates to the client and explain their decisions and actions. If they fail to act in the client’s best interest, they can be held legally liable.
Examples of Fiduciaries
- Personal Representatives: Appointed in a will to manage and distribute the deceased’s estate.
- Trustees: Manage and distribute assets in a trust according to the terms set out in the trust document.
- Financial Advisors: Offer investment advice and manage portfolios while prioritizing the client’s financial goals.
- Agents under Power of Attorney: Handle financial or medical decisions on behalf of the principal if they are unable to do so themselves
Why Fiduciaries Are Important
Fiduciaries play a crucial role in managing someone else’s assets or affairs. They provide peace of mind, ensuring that decisions are made in the best interest of the person they represent. This is particularly important in estate planning, where fiduciaries help carry out the wishes of individuals who may no longer be able to manage their own affairs.
In summary, a fiduciary is a trusted individual or entity that acts in the best interest of another,with a commitment to honesty, transparency, and accountability. If you are considering appointing a fiduciary, choose someone who will act responsibly and uphold the high standards required of this important role.
