If you suffer an accident and cannot manage your affairs, estate planning can change your life. By naming someone you trust as fiduciary, you give them the power to manage your resources in your best interest. When a loved one names you as fiduciary, you must protect their interests to the best of your ability.
As Consumer Finance reports, a fiduciary is a person or organization legally required to act in the best interest of another person. This role can be filled by financial advisors, attorneys, or even a close family member. When you’re named as someone’s fiduciary, your primary duty is to manage their money and property to benefit them, not you.
Fiduciaries are commonly appointed through a power of attorney (POA), which grants them the authority to make financial or health-related decisions for another person. Other roles that involve fiduciary responsibilities include trustees, guardians and executors.
A fiduciary’s duties go beyond simply making decisions. There are four primary responsibilities that a fiduciary must follow:
A trustee is a specific type of fiduciary. Trustees are responsible for managing assets held in a trust for the benefit of others, known as beneficiaries. Smart Asset states that they must follow the instructions in the trust document and act in the beneficiaries’ best interests. Trustees have many essential tasks, including managing investments, distributing assets and ensuring that the trust complies with legal and financial rules.
For example, many parents set up trusts for their children. The trustee’s job is to manage the assets in that trust in accordance with its obligations toward the children. These could be money for education, living expenses, or something else. Trustees must also file taxes and communicate with beneficiaries about the trust’s status.
In addition to trustees, there are several other common types of fiduciaries you might come across in estate planning:
Choosing a fiduciary is one of the most critical decisions in estate planning. You need someone you trust to make financial and legal decisions on your behalf. Whether it’s a family member, friend, or professional, your fiduciary should be responsible, reliable and have your best interests at heart.
The wrong fiduciary can create problems such as mismanaged finances, legal disputes, or even lost assets. That’s why it’s essential to talk to an estate planning attorney who can help guide you through the process and ensure that your fiduciary understands their responsibilities.
Choosing a fiduciary and understanding their duties is a critical step in the estate planning process. To ensure that you have the right plan in place for your future, consider speaking with an estate planning attorney. They can help you set up trusts, name fiduciaries, and create a comprehensive plan protecting your assets and loved ones.
Legacy One Law Firm, APLC is an estate planning law firm in Los Angeles, California, serving families throughout the State. Schedule a quick and easy consultation with our estate planning attorney, Sedric E. Collins, Esq., or call 323-900-5450.