Individuals and/or entities known as fiduciaries play roles in most estate plans. It is important for you to understand not only what these fiduciaries do, but also why these roles are so important. Here are a few facts about fiduciaries and their responsibilities.
Each fiduciary you appoint will have specific duties that will differ depending on the position and responsibilities you ask that person to assume. For example, if you appoint someone to act as your health care agent, that person has the responsibility to make medical decisions for you in the event of your incapacitation. On the other hand, someone you appoint as your agent under a financial power of attorney will have the responsibility to manage your finances for you should you become unable to handle them for yourself. Similarly, the person appointed as a successor trustee of your trust will have the responsibility to manage the assets in your trust upon your incapacity or death.
Once someone accepts a fiduciary role that person has an enhanced legally binding duty. Unlike ordinary people, fiduciaries have a legal obligation to do what is best for you and to only act in your best interests.
For example, if you create a financial power of attorney, your agent will have the ability to manage your finances, pay your bills, enter into contracts on your behalf, or other specific duties that you give that person. The fiduciary cannot simply use that position to better his or her own interests by, for example, using your money for his or her own purposes. Fiduciaries who violate this responsibility face significant civil, and possibly criminal, penalties.