What is a Fiduciary?
According to the dictionary, a fiduciary is a person or entity, such as a bank that by law acts on behalf of someone else in various situations. The most important things to know about fiduciaries is that they are in a position of trust with regard to the people on whose behalf they act, and they must therefore, by law, put the interests of those people ahead of their own in everything they do.
Becoming a Fiduciary
It’s possible that you yourself may become a fiduciary. For instance, someone may name you as the executor of his or her will, requiring you to become the personal representative of his or her probate estate when he or she dies. Someone also may name you as the trustee of a trust he or she establishes with the help of an estate planning lawyer.
In the probate example, you will be in a fiduciary relationship with the decedent’s estate and its heirs. In the trust example, you will be in a fiduciary relationship with the trust and its beneficiaries. If you are looking for an estate planning lawyer in Elizabeth, NJ, then a lawyer from a firm like The Law Office of Wade Suthard, P.C., may be able to assist you.
Performing Your Fiduciary Duties
Usually the will or trust will spell out exactly what your fiduciary duties will entail. These may include one of more of the following:
- Managing the estate or trust
- Making investments
- Buying and selling assets
- Preparing and filing tax returns
- Distributing the assets and/or the income they produce to the designated heirs or beneficiaries according to the provisions of the will or trust
What if You Make a Mistake?
Obviously, assuming the role of fiduciary carries significant responsibility. Since you are in a position of trust with regard to the estate’s heirs or the trust’s beneficiaries, they must be able to trust implicitly that you are working for their best interests. Furthermore, the law requires that you do exactly that.
This does not mean, however, that you will be held legally accountable for inadvertent mistakes you may make. For instance, if you invest trust assets in what you believe is a “sure fire” stock, but the market unexpectedly crashes and the stock’s value plummets, it’s unlikely that an heir or beneficiary will sue you for breach of your fiduciary duty.
To rise to the level of a breach of your duties, you must knowingly and deliberately do something that devalues the estate or trust or discriminates against one of more of its heirs or beneficiaries. For instance, converting some of the assets to your own use definitely qualifies as a breach of your fiduciary duties.