What is a Fiduciary?

A fiduciary is a person who holds or manages the money or property on behalf of another person. A fiduciary carries the responsibility to act in good faith and in the best interests of the person. They carry the responsibility to act in good faith and in the best interests of the beneficiary they are responsible for. A fiduciary relationship can exist between two people, such as when one individual holds title to the property for another or when one individual has control over financial assets belonging to another party.

1. The fiduciary as trustee has the responsibility of carrying out the terms of the trust as set forth in a trust document. A trust can be created by the language found in a will or a document created during life. The trustee is usually a person named by the creator of the trust in the trust document. In some cases, the trustee cannot carry out his or her duties either because of incapacity or death. If there is no named successor trustee who can serve, the court has the responsibility of appointing a trustee, usually someone who is nominated by the trust beneficiary(s).
2. The fiduciary as personal representative is an individual appointed by the probate court to administer the estate of a person who has died, referred to as a “decedent.” A personal representative will either act as an Executor if named in the will, or as an Administrator if not named in the will, or if there is no will. The personal representative inventories and safeguards assets, collects income, verifies and pays obligations, identifies and notifies heirs and beneficiaries, and distributes assets.
3. The fiduciary as representative payee is a person designated by the Social Security Administration or other retirement plans to receive the income and pay the expenses of an incapacitated individual.
4. The fiduciary as Agent Under Power of Attorney. The responsibilities of a fiduciary acting as an Agent under Power of Attorney include the following: For health care, the fiduciary acts as attorney-in-fact to make health-care decisions, including placement, medical, treatment and final burial arrangements. More recently an Advance Health Care Directive provides this guidance. For financial matters, the fiduciary conducts personal and financial business pursuant to the client’s written instructions.

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Who Oversees Fiduciaries?

The majority of people assume that the government oversees financial institutions, and holds them responsible for creating a sound financial system. A majority of financial institutions are actually overseen by private juristic persons. These private entities can be companies, such as banks and investment companies, or trusts. Fiduciaries can have multiple different levels of oversight. Because there are many different types of fiduciary relationships and it is impossible for the government to create a single set of standards for all fiduciaries.

These organizations have fiduciary oversight and responsibility to ensure that the fiduciary is acting in the best interests of the beneficiary, and not discriminating against any beneficiaries. The federal government has limited oversight over financial institutions, mainly in regard to interstate banking. The federal government provides oversight over specific areas of financial activity, such as some insurance companies and pension funds.

Who Needs A Professional Fiduciary?

A professional fiduciary is often hired by people who do not qualify as independent managers on their own. The main reason a professional fiduciary would be needed is when the beneficiary has an ongoing or chronic illness or is too young to make valid decisions on their own. Many of these clients require financial analysis, trust administration, and management to ensure that everything is being done in their best interests. They also may need guardianship services if they are deemed legally incompetent by a court of law. These services are provided by qualified professionals in the field, such as a professional Fiduciary, who have been recognized as trustworthy representatives of the beneficiary.

Financial institutions often act as fiduciaries for their customers. Fiduciaries often have the ability to make significant financial decisions on behalf of other persons or institutions. An investor or a borrower can be a fiduciary, but they are usually only expected to act in the best interests of the investor. They also do not have any responsibility towards other investors or lenders, so long as they fulfill their responsibilities to those investors and lenders that are theirs.

How Do You Select a Qualified Fiduciary?

Fiduciaries are legally obligated to act in the best interests of the beneficiary. You can tell that a fiduciary is acting in line with their legal obligations by looking for a few key signs. A fiduciary should be able to show that they have a plan for future actions and that they are able to show their decisions are rational and calculated. Professional fiduciaries usually take on many different cases, so they must not only be skilled at what they do but also must be able to prioritize those cases effectively. They must be able to show that they are a trustworthy individual, and are willing to take on their responsibilities.