Do You Have a Plan for a Successor Fiduciary?

A fiduciary refers to an entity or individual who is approved to act on your behalf regarding legal and financial matters. When a person is in the role of fiduciary, they must put your best interests and the best interests of beneficiaries at the forefront. This means there is both a legal and ethical obligation to act in good faith which extends to the management of estates and trusts.

A fiduciary, however, might end up being a different person than the original individual installed in this role. For example, a successor fiduciary is someone who assumes a fiduciary’s role in the event that the original person is no longer able to fulfill their duties. Successor fiduciaries might also apply for those trustees who manage assets that have poured over from a trust into an estate. If you don’t think ahead about these provisions and planning, a successor fiduciary might be appointed by the court directly.

This means you want to work with your own estate planning lawyer to determine the name of your successor fiduciary and to have this established in your estate planning documents well in advance of needing them. Set aside a time to speak with an experienced and dedicated lawyer about how to use fiduciaries and successor fiduciaries to accomplish your goals.

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What Is a Fiduciary’s Duty of Impartiality?

A fiduciary has several different responsibilities to the beneficiaries of an estate or a trust. Violating these could constitute a breach of fiduciary duty and being removed from this role or even being found personally accountable for financial mistakes that harmed the value of the trust or the estate.

One of these duties is a duty of impartiality. An executor or trustee cannot favor one beneficiary over another. If someone is serving as a trustee and is a fiduciary in that manner, they must balance the interest between the current and future beneficiaries. Future beneficiaries may be interested in how much the assets can grow over time, whereas income beneficiaries are interested in what they can receive right now.

The trustee cannot bend to pressure either side. By weighting the portfolio of investments in either particular direction the trustee is violating their duty of impartiality. The duty of impartiality also applies to the charging of expenses. Expenses that are charged against income will affect the income beneficiaries and charges against the principle will impact how much is inherited in the future.

Any distributions of principle or income to current beneficiaries should be made with impartiality in mind. Some people choose to appoint a professional trustee like a bank or a lawyer because those individuals might have more experience in handling complex concerns associated with a trust. This can also remove the personal level of connection that another family member has, which could cause friction between them and beneficiaries of the trust.

If you are not sure how to balance these competing interests or have more questions about how this applies to your estate, set aside a time to speak to a knowledgeable lawyer.

What Does It Really Mean to Be a Fiduciary?

The financial and estate planning world is filled with important terms that must be properly understood in order to make educated decisions to protect your interests. The concept behind a fiduciary is relatively simple but very important to understand. A fiduciary is a corporate entity or a person who has been appointed to act on behalf of someone else.

This includes actions in situations that require trust, good faith and honesty. It is a significant obligation to be named as a fiduciary, and likewise, if you are naming a fiduciary to manage your estate or your trust, you will need to think carefully about who you can rely on in this role. This is because fiduciaries must meet a standard known as duty of care.

A professional appointed as a fiduciary has to stay current with life changes of beneficiaries and assets so that they can provide a high and professional level of ongoing care. Fiduciaries are responsible to the beneficiaries they serve, meaning that a fiduciary cannot legally act in their own best interests.

It is their responsibility to act only in the best interests of the party they represent. If you are thinking about who to instill in a fiduciary role as part of your estate, spend some time thinking about this before scheduling a consultation with an estate planning lawyer.

Any abuse of an elderly person under a power of attorney or other similar document could lead to that person being removed from their role. This is why it’s important to understand the distinctions in the law and to work with a qualified lawyer in Virginia Beach to take action if and when a fiduciary has crossed the line.