UPDATE: On June 9, 2017, the Fiduciary Rule went into effect. This law requires anyone who provides retirement advice for a fee to act “in the best interest” of their client. The financial advisors must also disclose information to investors about potential fees and conflicts of interest relating to investors’ 401(k)s, IRAs, and other retirement accounts. The financial advisors must adopt all of the Fiduciary Rule’s required procedures by January 1, 2018.
Summary: A fiduciary, in estate planning terms, is a person who has a legal or ethical relationship with another person. Fiduciaries typically have a professional obligation to advise a person in matters of law, finances, or property — keeping the other party’s best interests in mind.
The term “fiduciary” has started to come up more frequently in conversation, thanks in part to a recent investigative piece by comedian-turned-political commentator John Oliver. On his show, Oliver took a look at fiduciaries in the context of financial planning and advising. The concept of a fiduciary, however, also plays a significant role within the realm of estate planning.
To begin, a fiduciary is a person who has a legal or ethical relationship with another person, and has agreed to provide them with the highest standard of advice or service. Often, these fiduciaries have advanced training, education, or certification in a specialized field. Their relationships with other parties is all about trust: they help others make informed decisions on complicated issues, and put other’s needs above their own.
A fiduciary’s professional obligation to others is called their fiduciary duty. These obligations can apply to anyone who handles an individual’s money (financial advisor), property (real estate agent), or someone who advises others in legal matters (attorney). Fiduciary duties typically involve providing advice solely in the interest of another party. Fiduciaries should avoid conflicts of interests, making profits off their advisory relationships, or any other situations which may impede their ability to provide high-quality services to others.
So why is being a fiduciary, or involving a fiduciary, important? Essentially, because without one, there is very little preventing one party from taking an unfair advantage of another party. For example, in the financial field, financial advisors are not bound by fiduciary duty; they are only required to recommend products that are suitable for clients. A financial fiduciary, however, is registered with the Securities & Exchange Commission (SEC) or state securities regulators and is required to recommend financial products in the client’s best interest.
In estate planning and probate law, there are a number of people who may be considered fiduciaries or have fiduciary duties to others. An attorney has a fiduciary duty to his or her client; the attorney possesses advanced education and training, and is obligated to provide the highest quality of advice and service to those clients. There are also a number of fiduciary roles in estate planning. An “executor” is a fiduciary named in someone’s will, who handles an individual’s estate and wishes after their death. The executor is in charge of probating the will, collecting and distributing assets, paying off any debts or administrative expenses, and filing tax returns. Similarly, a “trustee” is a fiduciary selected to manage the assets of a trust. That person decides when or how to invest the assets, they distribute the trust funds, and periodically, they provide financial reports to the trust’s beneficiaries. An “agent,” under what is called a “durable power of attorney” is a fiduciary who is authorized to act on an individual’s behalf in financial and other matters. They can make account transactions, receive payments from retirement/pensions/Social Security, sell property, or make gifts to others.
If you have been named a fiduciary of an estate and are wondering whether you want to do it, click HERE.
When it comes to organizing your estate, you want someone who will provide the best advice for your unique situation, and who will be personally responsible for correctly carrying out your final wishes. A fiduciary meets both of those stipulations. For more advice about selecting the right fiduciary for your estate, please visit Siedentopf Law’s website at EstateLawAtlanta.com or call (404) 736 – 6066.
© Sarah Siedentopf and Siedentopf Law, 2018. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Siedentopf Law and EstateLawAtlanta.com with appropriate and specific direction to the original content.