Understand the meaning of fiduciary duties, because it is essential to picking your trustee.
- Fiduciary relationships are followed by a severely stric code of conduct, which is heavily enforced in the court of law.
- Understanding the duties of fiduciaries is essential when appointing a trustee.
- Not all financial servicing agents, such as brokers and advisors, abide by fiduciary standards, whereas institutional trustees, such as Kiss Trust, must.
Fiduciaries are an essential element in today’s financial world. Their impact is felt across the financial sector. But since fiduciary does not always describe those who manage or invest assets (e.g. Financial Advisors), it is important to understand the duties that fiduciaries have so you know whether you are involved with a fiduciary or non-fiduciary.
Fiduciary relationships must conform to the Prudent Person Rule (1) the duty to act loyally to another party and (2) the duty to care for another party. Also, no fiduciary operates without a relationship to a Beneficiary.
The relationship between the fiduciary and the Beneficiary should be “arm’s-length” and fully disclosed. In some instances, the fiduciary may revoke access to assets from the Beneficiary. These acts are taken in the best interest of the Beneficiary. For example: The fiduciary may delay scheduled payouts when the Beneficiary is suffering from substance abuse, or facing a legal threat. In those cases, withholding access protects the assets of the Trust and preserves those same assets from misuse or the claims of the beneficiary’s creditors.
Understand that the duties of a fiduciary require multi-disciplined expertise and should not be performed by those lacking same. As stated in our Fiduciary 101 blog, an independent institutional fiduciary (trustee) is usually the safest choice when planning the management of your financial affairs.
Take the next step: Create your individual living trust, provided with lifetime fiduciary services. Visit Kiss Trust to learn more.