Guardianship Encyclopedia What is a Fiduciary

What is a Fiduciary?

A fiduciary is a person or institution given the power to act on behalf of another in situations that require great trust, honesty and loyalty. Fiduciaries you may already be familiar with include accountants, attorneys, bankers, business advisors, financial advisors, mortgage brokers and real estate agents. These individuals are hired to act in your best interest and must set aside their own personal motives in favor of your goals.

There are a variety of fiduciaries that can act on your behalf:

Personal Representative/Executor – This fiduciary will be responsible for administering your estate in accordance with the directions contained in your Last Will and Testament; can be one or more individuals and/or an institution such as a bank or trust company.

Trustee – This fiduciary will be responsible for managing the assets that you title in the name of your Revocable Living Trust or any other type of trust you create in accordance with the directions contained in the trust agreement; can be one or more individuals and/or an institution such as a bank or trust company.

Health Care Agent/Surrogate – This fiduciary will be responsible for making medical decisions on your behalf in accordance with the directions contained in your Advance Medical Directive, also called a Medical Power of Attorney or Durable Power of Attorney for Health Care; can't be an institution or a health care provider who is currently treating you.

Attorney in Fact – This fiduciary will be responsible for managing assets that are titled in your individual name in accordance with the directions contained in your financial Power of Attorney; can be one or more individuals and/or an institution such as a bank or trust company.

Preneed Guardian – This fiduciary will be responsible for taking care of you and your property if you're determined to be mentally incompetent by a court and in need of a court-appointed guardian to manage your affairs; you can designate this fiduciary either in a free standing legal document or in your Advance Medical Directive or medical or financial Power of Attorney.

Guardian for Minor Children – This fiduciary will be responsible for taking care of your minor children in the event you die while the children are still minors; you can designate this fiduciary in your Last Will and Testament.

Who can serve as a Fiduciary?

All states require that a person serving as a fiduciary must be over the age of 18 or 21. The exact age depends upon the state laws where the fiduciary will be carrying out his or her duties. Note that if you appoint someone to serve as your fiduciary who is under the age required by your state's law, then that person won't be allowed to serve and the successor you've named (if any) will serve instead.

Fiduciaries serve by court appointment as guardians, conservators and personal representatives of estates. They also serve by agreement as trustees, representative payees or as agents under powers of attorney.

The fiduciary as trustee has the responsibility of carrying out the terms of the trust as set forth in a trust document. A trust can be created by the language found in a will or a document created during life. If the former, it is a testamentary trust; if the latter, it is a living trust. The trustee is usually a person named by the creator of the trust in the trust document. In some cases, the trustee cannot carry out his or her duties either because of incapacity or death. If there is no named successor trustee who can serve, the court has the responsibility of appointing a trustee, usually someone who is nominated by the trust beneficiary(s).

Trustee duties can include funding the trust with appropriate assets, safeguarding assets, investing the trust assets according to the Prudent Investor Rule (as set forth in the Probate Code), reporting to beneficiaries (as set forth in the Probate Code) filing income tax returns for the trust and making distributions in accordance with the trust terms.

The Fiduciary as Conservator is the person who is legally appointed to manage the Conservatee’s estate and/or person. A Conservatorship is a legal tool to provide management for the financial and/or personal affairs of individuals deemed by the court to be physically or mentally incapacitated. A Conservatee is a person who is the subject of a conservatorship. A Conservator of the Person is appointed by the court to assume responsibility for decisions regarding the health and welfare of a person. A person is determined by the court to be incapacitated when he or she lacks sufficient understanding or “capacity” to make or communicate responsible decisions concerning his or her daily living needs. A Conservator of the Estate is responsible for the prudent use and protection of the conservatee’s assets. The conservator is responsible for inventorying, marshalling and managing all assets and benefits belonging to the Conservatee. The conservator receives income, pays obligations of the estate, applies for pensions, and organizes data for the preparation of income tax returns and other related duties.

How is a Conservator Appointed?

Anyone who believes a person may need help with daily living activities and/or finances can initiate the process to appoint a fiduciary as a conservator. The concerned person may contact a fiduciary of choice to investigate the situation. If the fiduciary identifies sufficient need, he or she will retain an attorney to petition the probate court for appointment as conservator.

How is the Conservatee Protected?

The probate court often appoints an attorney to represent the alleged incapacitated person. A court investigator is also appointed by the court to determine the need for a conservator and to recommend a suitable person to serve in that role. All issues and information are brought before a probate court judge who decides if the person is incapacitated or in need of protection and, accordingly, appoints a conservator. The appointed fiduciary is accountable to the court for his or her work. The fiduciary must report to the court and receive the court’s approval in carrying out his or her responsibilities. The court requires the posting of a surety bond by the conservator, which is intended to protect the assets of the conservatee’s estate.

The fiduciary as personal representative is an individual appointed by the probate court to administer the estate of a person who has died, referred to as a “decedent.” A personal representative will either act as an Executor if named in the will, or as an Administrator if not named in the will, or if there is no will. The personal representative inventories and safeguards assets, collects income, verifies and pays obligations, identifies and notifies heirs and beneficiaries, and distributes assets.

The fiduciary as representative payee is a person designated by the Social Security Administration or other retirement plans to receive the income and pay the expenses of an incapacitated individual.

The fiduciary as Agent Under Power of Attorney. The responsibilities of a fiduciary acting as an Agent under Power of Attorney include the following: For health care, the fiduciary acts as attorney-in-fact to make health-care decisions, including placement, medical, treatment and final burial arrangements. More recently an Advance Health Care Directive provides this guidance. For financial matters, the fiduciary conducts personal and financial business pursuant to the client’s written instructions.

Cost of Services for Fiduciaries

In most court-supervised cases, the Probate Court approves reasonable fees. In non-court-supervised cases, fees may be addressed in the estate planning documents. Professional Fiduciaries have a published fee schedule.