When thinking about estate-planning, people often come across the word “fiduciary.” A fiduciary is someone who is legally entitled to handle the assets and liabilities (also known as an “estate”) of another person. A fiduciary’s powers over another person’s estate can be established due to the estate owner’s minority status, mental incapacitation, or death, and in those cases the fiduciary is known as a Conservator or Personal Representative, respectively. A person can also name a fiduciary when an individual voluntarily gives up legal rights to manage some or all of their assets and liabilities and in that situation the power is transferred to a designated person by way of power of attorney or a trust.
The authority to manage assets of a person deemed legally incompetent by way of mental incapacitation passes to a fiduciary (or Conservator) following a Court hearing and order adjudicating incompetency. Similarly, a Personal Representative is nominated in a Will and appointed in the Order of the Court. Both the fiduciary duties from serving by Power of Attorney or Trust will be outlined in the documents that nominate the persons for those roles.
In any circumstance, the role of a fiduciary is critically important to efficient and lawful estate management. Fiduciaries must act with integrity, diligence, and most importantly, adhere to the law in the state where they serve. In fact, fiduciary violations are considered to be serious breaches of law, and may result in severe legal and professional consequences. Unfortunately, violations are incredibly common, easy to make. Liability for breach of fiduciary duty does not require proof of bad intentions or malintent—even innocent breaches can result in liability for the fiduciary on a personal basis. Breaching your fiduciary duty almost always results in legal accountability, even if the breaches are merely the result of simple mistakes or oversights. Stay tuned for my next post on how to avoid common mistakes as a fiduciary.