Fiduciaries have a number of legal responsibilities.
Serving as a fiduciary is an honor.
A fiduciary is often selected to administer an estate or trust.
He or she may also be responsible for managing the lifetime finances of another individual as an attorney in fact under general durable power of attorney.
According to a recent New Hampshire Union Leader article titled “What does it mean to serve as a fiduciary?,” fiduciaries are legally bound to place the interests of the beneficiaries under any legal instrument appointing them above their own self-interests.
How do they do this?
First, they must understand the governing instrument, whether the governing instrument is a last will and testament, a trust, general durable power of attorney, or other legal document.
The authority of the fiduciary is limited to those outlined in the document.
Even so, fiduciaries do not need to act on a power simply because they have it.
In some cases, what one can do is not what one should do.
For example, the ability to make distributions to a trust beneficiary may not be in the best interest of the trustmaker or even the beneficiary.
Making a distribution could breach fiduciary duties.
Second, keep thorough records.
This role carries a lot of responsibility (and potential liability).
Detailed records can help protect fiduciaries from claims made against them.
All expenses and expenditures should be documented and explained.
Transparency in the work of a fiduciary is essential.
Discussing decisions or transactions with the family before acting can be beneficial.
Third, keep personal or business funds separate from the estate.
This is especially important if one is the fiduciary of more than one estate.
Mixing funds and property could get messy quickly.
Fiduciaries must take their responsibilities seriously to avoid litigation or liability.
Discuss any concerns with an experienced estate planning attorney before accepting or granting this responsibility.
Reference: New Hampshire Union Leader (December 7, 2019) “What does it mean to serve as a fiduciary?