18 May What Is a Fiduciary?
By: Barry E. Haimo, Esq.
May 18, 2015
A fiduciary is a position that can be designated to a person or a business entity to perform some role or capacity. You often find them in terms of trustees of trusts, or personal representatives of estates. These people or entities have a heightened sense of care to perform the jobs in which they are supposed to perform; which means that if they fail to perform or they breach their duty they could be personally liable.
Who Can Be a Fiduciary
A fiduciary is a title for someone or some entity that is trusted with special responsibilities over a person’s finances. Fiduciaries are expected to act in the best interest of those to whom they owe their duties (beneficiaries, principals, clients, and so on). Examples of fiduciaries may include:
- Trustees of trusts
- Personal Representatives of estates
- Directors of corporations
- Managers of LLCs
- Business Advisers
- Real Estate Agents
- Title companies
Fiduciaries may or may not hold written legal responsibilities, but there are definitely moral and ethical responsibilities in a fiduciary relationship.
Fiduciary vs. Suitability Standards
Not all financial relationships involve fiduciaries with your best interests in mind. When you place your assets in investments or purchase insurance, you will have to put your trust into insurance salespeople, advisers, and brokers.
Unfortunately, these relationships are not always held to fiduciary standards. Most of these financial relationships operate under “suitability standards” – they focus on the potential success and suitability of an investment at the time it is made, rather than thinking long-term or holding their client’s interests as a top priority.
When you speak with advisers and dealers, ask them about their business philosophies regarding transparency and investment approaches. If they are operating under fiduciary standards, they should be able to tell you their intentions and desired results openly and honestly.
Fiduciary Breach of Responsibilities
What if a fiduciary is not working in your best interest? What if you or your loved ones suffer financial losses at the hands of a fiduciary neglecting their responsibilities? Can you take legal action?
Absolutely. But the laws can be complex and confusing.
Some duties are determined through legal writing or contracts. When you create a trust, be sure to include the expectations and responsibilities you have placed on your fiduciaries and trustees. These cases will be easier to determine and administer.
However, even if duties and responsibilities were not explicitly written, you can file a lawsuit for breach of fiduciary duty. Judges will consider the nature of your relationship, the extent of which the duty was breached, and the losses that occurred due to the breach of responsibility. Like all litigation, it could be expensive and time consuming to win your case.
When you speak with advisers, trustees, or anyone that you may consider a fiduciary, it is important that you explicitly discuss or draft the responsibilities the person or entity holds as a fiduciary.
When a fiduciary breaches their duty, it could affect you, your family, and your estate. Consult a Florida estate planning attorney to secure the relationship between you and your fiduciaries and create estate planning strategies for asset protection and a smooth transfer of assets to your loved ones.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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