A fiduciary is an individual or institution that has been given the authority to act on behalf of another. It sounds rather simple at first, but there is much more to the position than is apparent from the mere definition. Along with the authority to act on someone’s behalf comes a tremendous amount of responsibility and liability.
The term fiduciary refers to many different titles. For example, an Executor, Personal Representative, or Administrator is a fiduciary who has been named in a Will or appointed by a Court to administer a decedent’s estate. A Trustee is a fiduciary who has been named in a trust document to administer a trust. A Conservator or Guardian is named as a fiduciary to administer assets on behalf of a ward or minor.
No matter what the name, a fiduciary becomes responsible for managing, safekeeping, investing, and otherwise preserving the assets of another. Included with this is a responsibility for the filing of all related tax returns and the payment of all taxes. In many instances, there are required accountings to the court or to the ultimate beneficiaries. If assets are mismanaged or if required filings and payments are not made in an accurate and timely manner, the fiduciary can be held personally liable for any losses, penalties, or interest.
It should at this point be clear that naming an Executor in one’s Will or a Trustee in one’s trust is not a matter to be taken lightly. Careful consideration should be given to the potential fiduciary’s honesty, integrity, and ability to handle the associated responsibilities in the best interest of all of the beneficiaries. Consideration should also be given to the amount of time that will be involved to fulfill the duties.
In short, naming a fiduciary is not a simple matter. An attorney can provide valuable input in your decision-making process, and an honest discussion with your potential fiduciary would be very wise. Too often, fiduciaries are chosen for the wrong reasons resulting in inefficient administrations, costly mistakes, and unhappy beneficiaries. Choose carefully!