What is a Fiduciary?
What is a fiduciary, and why is it important to know what a fiduciary does? If you are planning your estate, you really need to have a good handle on what the term means. Your fiduciary may be your attorney, your executor, your trustee, a guardian, or your attorney-in fact (a fancy term for an agent under a power of attorney).
In school I learned that the Latin fiducia means trust. When you need to trust someone with your property (a fiduciary), you need someone who will act in your best interest (not the fiduciary’s best interest), and who will do so with total trust, good faith, and honesty. It can make sense that your named fiduciary has even more knowledge and expertise than you yourself or your beneficiaries.
Most people don’t realize the high standard of conduct required of a fiduciary. It is not a casual role for a stranger to play. Instead, a fiduciary has specific duties:
- Duty of Care – make informed decisions
- Duty of Loyalty – act without personal conflicts of interest or personal gain
- Duty of Good Faith – act without wrong intent
- Duty of Confidentiality – do not improperly, or for personal gain, disclose information
- Duty of Prudence – act with appropriate skill, care, and caution
Any attorney worth his salt will tell you he has seen fiduciaries violate their sacred duties. I’ve seen Executors use estate funds for personal purchases. I’ve seen attorneys-in-fact use the assets of the person who appointed them to buy and maintain property for themselves. Named trustees aren’t always trustworthy and can misappropriate funds. The moral from such stories is to take a great deal of care when you appoint someone to be a fiduciary.
If you name a fiduciary, name someone of integrity who can be trusted to do the right thing. If you yourself are named to be someone else’s fiduciary, be prepared to work with the very highest standards of honest conduct.