What is a Fiduciary?

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A fiduciary is an individual or an entity in whom someone has placed significant confidence and trust to manage his or her financial and/or personal affairs either during their lifetime or after their death.  The fiduciary has a legally enforceable obligation and duty to act in the best interest of the person(s) the fiduciary serves.  Common examples of fiduciaries are:

  • A personal representative (also known as an executor) appointed under a Last Will and Testament;
  • A trustee appointed under a living or testamentary trust;
  • An agent appointed under a financial power of attorney;
  • An agent appointed under a health care power of attorney; and
  • A guardian and/or conservator appointed by a court to manage the personal and/or financial affairs of an individual who is physically and/or mentally incapacitated.

The fiduciary relationship (and the corresponding duties and obligations that come with it) only arises if the individual or entity actually accepts the fiduciary appointment.  Careful thought and consideration should be given to the individual or entity being appointed, as well as to the authority, duties, and responsibilities of the fiduciary.  The appointment of a fiduciary who does not have the requisite skills, time, or commitment may lead to unintended consequences.  Having a clear understanding of what the fiduciary’s role will be is extremely important. With a comprehensive estate plan, an individual has the ability to designate and appoint the individuals or entities he or she deems most appropriate to serve in these fiduciary capacities.  Failing to make these appointments while living and competent may result in the appointment of fiduciaries you may not have otherwise selected.