A fiduciary is a legal term identifying a person or entity with a special legal relationship with another, imposing an obligation that the fiduciary act in the best interests of the other, its client. Parents, trustees, guardians, advisors, counselors, caretakers, attorneys and persons using a Power of Attorney are often held to be fiduciaries. Not only can improper conduct (defalcation, self-dealing) land a fiduciary in trouble, but even someone doing their best can be held responsible if they fail to fulfill their duties or are unable to adequately demonstrate they did.
Some actions to avoid liability as a fiduciary include:
- Determining whether you are a fiduciary and for whom.
- Maintaining and following all documents making you a fiduciary.
- Recording all actions and time and preserving all records.
- Developing routines and procedures and following them.
- Calendaring and meeting all dates and deadlines.
- Seeking proper counsel and advice when necessary or unsure.
- Ensuring all financial records are clear, correct and preserved.
- Avoiding risks and only making secure or insured investments.
- Making records/reports available to those who are entitled to see them.
- Documenting any fees paid to you or others and all costs incurred.
- Considering and acquiring insurance when appropriate.
- Recording and preserving all communications and notes.
- Periodically updating and reviewing documents, accounts and investments.
- Acting always in your client’s best interest.
- Exercising the highest level of care and competency in decisions.
- Resigning properly when appropriate.
As fiduciaries act on their client’s behalf, the court holds them to the highest standard of honesty, transparency and competency, so do not take on this responsibility lightly.
The attorneys at Brooks, Tarulis & Tibble, LLC advise both fiduciaries and their clients, so if you have any questions or concerns, please contact us.