In today’s blog entry in our ongoing series on basic questions about estate planning, we turn our attention to fiduciaries. The term “fiduciary” is a term that has a special meaning in the law. It is also a term that is especially important when it comes to estate planning. To help clarify why this term is so important, let’s take a look at fiduciaries and the role they plan in your plan.
What is a fiduciary?
A fiduciary is a person who has an enhanced legal duty to act in the best interest of another person. In normal, day-to-day situations, you don’t have this same duty when you interact with people. For example, when you meet people in your daily life, you don’t have to look out for them, or do what is in their best interests. Though you can choose to do so, you are under no legal obligation to operate in this way. All you are legally obligated to do, or all you need to do to avoid legal liability, is to act in a reasonable and prudent fashion.
Fiduciaries are different. When someone agrees to serve as a fiduciary, that person agrees to abide by a heightened legal obligation. Failing to meet that obligation can expose the fiduciary to civil, and even criminal, liability.
What do fiduciaries do?
Fiduciaries work on behalf of others in a number of ways. When you create an estate plan you’ll have to choose a number of people who serve under a fiduciary obligation. An agent under a power of attorney, an executor of an estate, and a trustee of a trust you create all serve as fiduciaries, or hold a fiduciary duty.
What role do fiduciaries play in my Florida estate plan?
When you create a comprehensive Florida estate plan, you’ll have to choose a number of people who will represent you or make choices for you. These people operate under the requirements of a fiduciary duty, and have to act with your best interests in mind.
For example, when you create a durable power of attorney for finances, the person or organization you appoint as your agent has a fiduciary duty to act in your best interests. This means that even though the agent has the legal authority to manage your money and property and to make decisions on your behalf, the agent cannot simply take advantage of his or her authority. He cannot, for example, use your property as collateral to obtain a loan for his own purposes.