The question of “what is a fiduciary” is a common one amongst people who are just beginning the estate planning process. In today’s blog entry in our ongoing series on basic estate planning questions, we are going to take a look at fiduciaries, what they do, and why they are important. Understanding what a fiduciary does will help you feel a lot more comfortable about the people or organizations you select to represent you and your interests as you create your plan.
What is a fiduciary? It’s someone who owes another a heightened legal responsibility.
The term “fiduciary” is a legal term that identifies a person or organization that owes a heightened legal duty to someone else. As we go about our daily lives, we don’t owe others any duty to act on their behalf. In order to protect yourself from potential liability you have to act in a reasonable and prudent manner, but that doesn’t mean you have to protect others, take an active interest in seeing that their interests are protected, or serve them in any way.
Fiduciaries are different. When someone agrees to become a fiduciary, that person agrees to set aside his or her own personal interests, and do what is in the best interest of someone else. Should fiduciaries violate their duty, they face the possibility of civil, and even criminal, legal penalties.
What is a fiduciary? Your estate plan will rely upon several of them.
The reason you need to understand what a fiduciary is, is because, as a person who creates an estate plan in North Carolina, you will be required to choose several of them. Fiduciaries will play key roles in your estate plan and will serve to protect you, your interests, and your estate.
For example, let’s say you decide to craft a durable power of attorney for finances. Even though the power of attorney will only grant your agent the authority to manage your finances upon your incapacitation, that agent will have broad control over your money and assets. Luckily, the law requires that an agent under a power of attorney must act as a fiduciary. So, even though the agent has broad power to use your money and property, that agent cannot simply use his or her authority to take your money and run or otherwise do anything that is not in your best interests.
What is a fiduciary? It’s someone you need to choose carefully.
Any time you choose someone to represent you or your state, you have to make the choice carefully and give it as much thought as it needs. If you’d like more advice about how to best select someone to serve in a fiduciary role, contact us so we can provide you with advice.