Simply, a fiduciary is a third-party representative who is appointed to act on behalf of someone else.

The two most common fiduciaries in estate planning are: The Personal Representative, the person who handles the assets that are included in someone’s Will; and a Trustee, the person who handles the assets that have been placed in a Trust.

A Fiduciary is Experienced in Distributing a Trust

Handling an estate may seem like a simple process that anyone can easily manage. Many underestimate both the amount of work and the expertise needed to carry out required duties. There are a variety of laws that must be navigated, including complicated probate laws, and timelines that must be met. Accounting for estates and trusts can be extremely technical and require excellent record keeping and tracking. Your fiduciary must be able to show proper accounting that proves they have handled and managed the estate and its assets in an accurate, fair and unbiased manner. The fiduciary is at risk for liability and personal fines for failure of these duties. It’s imperative that an estate is run in a tax-efficient manner that does not overburden the Trust. Fiduciaries must understand how their actions affect the estate or Trust as well as the beneficiaries. This includes how assets are invested and distributed since Trusts are subject to different tax rates and laws than individuals or corporations.

A Fiduciary is a Neutral Third Party

Most people truly believe that their family members and friends will easily work together and agree on how your assets should be handled. Unfortunately, this is rarely the case. Appointing a family member or friend frequently causes tension or distress that may not have existed before. If not handled properly, this can easily result in stress, damaged relations or, in some cases, legal action between or against your loved ones. Good fiduciaries always strive to eliminate extra tension.

A Fiduciary is Cost Effective

Employing a professional fiduciary is cost-effective and something you should think about even if you do not consider yourself to be a high-net-worth individual. You may believe that it’s more expensive to hire a fiduciary to handle everything, rather than seeking individual counsel from different experts as needed. However, in many cases, a fiduciary’s cost will be equal to or less expensive than performing this yourself. A fiduciary has performed this before and can navigate the probate system nimbly and effectively.



Click to see what the State of California thinks.