Fiduciary is the title given to an individual or organization that is acting on behalf of another person or group of people. The distinction that makes the fiduciary unique is that they are bound to place the interests of their client ahead of their own.
A fiduciary is assigned by signing a contract or other agreement that assigns the fiduciary responsibility over an area of an individual’s life. A fiduciary can be required to oversee:
In addition to one-time fiduciaries who only serve the interests of another individual for a narrow task or set of tasks, there are also positions that are bound to act as fiduciaries. These business positions are often executive positions such as CEO or CFO, but bankers and financial advisors can also be bound to fiduciary duties.
The guiding principle for fiduciaries is a requirement to act “in good faith.” The good faith standard, also called uberrimae fidei, is a legal measure that obligates fiduciaries to act honestly. This honesty requires full disclosure of any and all potentially critical information, as well as a general prohibition of misleading the individual or individuals being taken care of. If a fiduciary does not act in good faith, there can be professional, monetary, and legal consequences.
When an individual is named as an executor, appointed as an administrator, or assigned power of attorney, that individual must act as a fiduciary. In general, even if these duties are not spelled out explicitly, a probate court may find that there is an implicit fiduciary duty whenever one party is forced to rely on another.
Fiduciary duty sharply limits the powers of the executor, administrator, or power of attorney. This limitation ensures that the individual only acts according to the wishes of the testator. In events where the executor, administrator, or power of attorney acts against the interests of their client, they may be legally liable for violating their fiduciary responsibilities or abusing their power.
One common instance where fiduciary duty can be abused is in elder care. Due to the declining capabilities of elderly individuals, they may assign a power of attorney to ensure their needs are met and their wishes are enforced.
When the power of attorney is assigned, they are bound to act as a fiduciary on the elder’s behalf. Under this fiduciary duty, the power of attorney must conduct the elder’s business in good faith and with loyalty to the elder’s wishes.
There are a number of ways in which the fiduciary duty may be breached and the power of attorney abused. Some examples include
A power of attorney who breaches their fiduciary duties opens themselves up to civil or potentially criminal charges or breach of fiduciary duty, violation of the power of attorney contract, or even elder abuse.
If you are creating a last will and testament, power of attorney document, or any other preparation that involves the creation of a fiduciary, you will need the expertise of a trusts & estates attorney. A trusts & estates attorney can review any fiduciary agreement and ensure that the limits and responsibilities of the fiduciary are clearly and explicitly stated in the contract.
Additionally, an experienced trusts & estates attorney can also be consulted on issues of suspected breach of fiduciary responsibility or abuse of executor, administrator, or power of attorney privileges.