The Role of a Fiduciary and Why It Matters
In financial matters and estate planning, you often hear about fiduciaries. As a Sacramento estate planning lawyer from a firm like Yee Law Group can explain, a fiduciary is someone who manages property or money for someone else. A fiduciary has a duty to prioritize the client’s interests over their own.
Although a fiduciary relationship can exist between family members or friends, it’s more likely that you’ll experience a fiduciary relationship when you’re dealing with professionals in finance or the law. Here’s why it matters.
A fiduciary has a duty of care and duty of loyalty toward your money. The duty of care refers to the way the fiduciary makes decisions about your financial plans. Under a duty of care, the fiduciary must make informed decisions, such as consulting industry experts, maintaining detailed records and following industry best practices.
The duty of loyalty means that the fiduciary cannot have a conflict of interest between managing your finances and their own personal interests. For example, a financial advisor would need to disclose any product that they are selling that they would receive a commission on.
Positions with a Fiduciary Duty
Lawyers in any type of practice have a fiduciary duty. The attorney has a role to protect a client’s wishes over their own. A lawyer who helps a client make an estate plan should be putting the client’s interests ahead of anything else. Lawyers have to tell you about any conflicts of interest that might put their fiduciary duty in jeopardy.
Financial advisors are often fiduciaries, but not all financial advisors are fiduciaries. A financial advisor who works for a brokerage may not be a fiduciary. This advisor can offer you advice and recommend products that are suitable for you, but if the advisor isn’t a fiduciary, these products could be what gives them a higher commission. The advisor is working for their own best interests, not yours. If you decide to work with a financial advisor, ask them about their fiduciary duty before getting started.
Trustees and guardians of minor children have a fiduciary duty toward the beneficiaries. If you’re working with an estate planning lawyer to set up care for your children in the event of your death, you want to choose a trustee who will honor their fiduciary duty. You may want to name an individual you trust, or you may want to name an institution, such as a bank, or a professional, such as a lawyer, to manage the trust.
Discuss your estate planning needs with a fiduciary to have peace of mind.