A fiduciary is a person who has power and responsibility, usually in financial matters, to act for another person. A fiduciary can also be a bank or law firm. Fiduciaries are legally required to act in the best interest of the client. Not all financial advisors are fiduciaries. Fiduciaries act in many different capacities. When you place your trust in a person, such as in a real estate deal or legal avenue, you want to know that this person is a fiduciary. A fiduciary has to set aside their own personal motivations to act in favor of your goals. Fiduciaries often serve in estate planning. Here are some examples of fiduciaries.
Executor of Your Will
The executor of a will settles your estate in accordance with your directions. If you have a will, you can name this person. If you die without a will, the court appoints this person. Regardless of how the executor takes the position, this person must act for you.
If you have set up a revocable living trust or another type of trust, your trustees are expected to act as a fiduciary for the trust and its beneficiaries. The interests of the trust and beneficiaries of the trust are foremost.
A Guardian for Minor Children
If you die while your children are underage, they will need someone to take care of them and their inheritance. Although in many cases, this is your spouse, but you can name different people to serve in different capacities as fiduciary agents. You may choose to have a lawyer or bank handle a large investment for your children until they get old enough to manage it on their own.
Some financial advisors are fiduciaries. Some are not. A fiduciary needs to avoid conflicts of interest and cannot use your assets for their own benefit. Financial advisors who also sell products may find themselves walking a tight line between advising a client about what is best for them against selling their products. You have to do your research when using a financial advisor who isn’t a fiduciary.
The code of ethics for lawyers consider them to be fiduciaries for their clients. Lawyers are considered fiduciaries for clients. What you say to your lawyer is confidential, in most cases. Lawyers may get a bad rap, but most lawyers follow their ethical codes very closely.