If you have been appointed executor of an estate or asked to administer a trust, you are often delegated a great deal of responsibility. When you take on these responsibilities, you become a fiduciary. In general, a fiduciary is a person who has a legal and/or ethical relationship with another person (called the beneficiary) and agrees to provide advice or services to the beneficiary. Typically, there are two main types of fiduciaries for estate plans: executors and trustees.
Estate Planning Fiduciaries
In estate planning, every person involved in the administration or settlement of an estate is considered a fiduciary. These people include:
- The estate’s executor, or the person or entity who initiates probate proceedings and oversees the estate’s resolution
- A designated trustee, who is tasked with managing a trust’s assets, adhering to its conditions, investing assets, and/or distributing assets to heirs
- A health care agent, given the power to make medical decisions on behalf of the beneficiary
- The guardian of a child or pet
- An estate’s attorney
A Fiduciary’s Duty
Each fiduciary has what is called a fiduciary duty: a legal obligation to represent the estate’s best interests. Fiduciaries may have different duties depending on their role and relation to the estate and its administration. An estate executor, for instance, must administer the estate’s assets in accordance with state rules and regulations. They have to:
- initiate probate proceedings
- notify potential heirs and creditors of the estate’s impending settlement
- inventory the deceased person’s holdings
- resolve any outstanding debts
- distribute inheritances
They are bound by their fiduciary duty to responsibly manage the estate and safeguard its assets.
Similarly, a trustee has a fiduciary duty to administer a trust in accordance with its conditions. They cannot use its assets to enrich themselves or withhold funds the trust says must be disbursed. Fiduciaries who breach their fiduciary duties can be challenged or sued in court.
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