Fiduciary Duty And What It Means For Estate Planning


By: HeirSearch.

A fiduciary is defined as any entity with legal obligations to act on behalf of another. Fiduciaries can be bankers, attorneys, accountants, financial advisors, or even real estate agents. In situations that rely on honesty and trust, a fiduciary must be motivated to do what is best for the party that delegated them this responsibility. When it comes to estate planning, the fiduciary’s primary duty is to protect the estate and assure timely passing of the property to the right heirs.

What Is A Fiduciary’s Role in Estate Planning

While the degree of power and oversight varies by fiduciary type, all fiduciaries have a duty to act in the best interests of the estate. In situations where there are multiple beneficiaries of an estate, choosing the right fiduciary becomes crucial.

For instance, naming multiple siblings or children to serve jointly as a fiduciary to carry out the duties of an estate could cause logistical issues or disagreements. Unless all parties agree on every single decision, whether it comes to paying bills or signing checks, disruptions can occur in the estate plan resulting in additional costs and delays.

Depending on the context, there are different types of fiduciaries. Executors are named in a will, trustees are named by a trust, and agents are appointed by a power of attorney.

Fiduciary Duty of an Executor

An executor handles every aspect of an estate after death, from locating and distributing assets to filing tax returns. It is the executor’s duty to ensure proper handling of the estate, and they are held accountable for their actions either informally by the beneficiary, or by a formal procedure in court. Deceptive, unfair, or negligent actions can result in litigation.

When administering an estate, some of the legal duties of an executor are to:

● Give notice to creditors and pay the debts of the estate.
● Prepare and file tax returns, distribute assets and close the estate.
● Account for all assets of the estate at all times
● Distribute money and assets in accordance with state law and the provisions of the will

Fiduciary Duty of a Trustee

A trustee is the legal owner of the trust property. However, the beneficial interest of the trust belongs to others. A trustee therefore owes obligations and duties to the beneficiaries of a trust. Simply put, a trust is a relationship between three parties – the settlor, the trustee, and the beneficiary.

A trustee holds and invests assets on behalf of the beneficiary. In the event of willful mishandling of accounts, the beneficiary can petition the court to have the trustee removed.

Fiduciary Duty of an Agent

An agent, or “attorney-in-fact,” is a fiduciary under what is called a “durable power of attorney.” This type of fiduciary is authorized to act on an individual’s behalf in financial matters where they can make account transactions, sell property, receive payments from retirement/pensions/Social Security, or even make gifts to others.
Essentially, an agent receives the legal power to act in the beneficiary’s name. That said, an agent’s fiduciary duty is to still act responsibly and in the interest of the beneficiary. Mishandling of funds by an agent may lead to their removal by the court.

Overall, fiduciaries have a distinct duty to act in the best interests of the parties they represent in matters of estates and wills. Any intentional breach of fiduciary duty during the estate planning process may be cause for a civil lawsuit. It is the responsibility of a fiduciary to thus act reasonably and in line with regional laws.

Do You Need Help Establishing Heirship?

At HeirSearch, we’ve seen it all. If you are the executor of a will, or an attorney representing an executor of a will, and need to establish heirship to satisfy the court, HeirSearch can help. We offer no-cost, no-obligation consultations, even if you are not planning to start a search right away.

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