Tips for Being an Effective Fiduciary
A fiduciary is an individual who takes on the legal authority to handle someone else's affairs as well as the legal responsibility to do so solely in the interests of that person or his or her designated beneficiaries. Fiduciary relationships can exist in a variety of contexts. However, for our purposes the most common types of fiduciaries are the personal representative of an estate and the trustee of a trust.
Being a fiduciary is an important and potentially complicated job. That is why I always stress the importance of choosing a capable and trustworthy fiduciary when drafting a will or trust. For those who have already been tapped as a fiduciary and are unsure of how to proceed, here are a few broad and simple tips that can help you be more effective, reduce your stress and preserve good relations with the beneficiaries:
- Know the document — In addition to the provisions of the Florida Estate and Trusts Code, most fiduciaries are further limited and directed by a document. For personal representatives it is usually a will. For trustees, it is the trust instrument. Beyond basic distribution schemes, these documents may also provide more detailed instructions about how fiduciary property is to be used or invested. Therefore, knowing and understanding the document should be your first priority.
- Keep records — A fiduciary must be able to justify and account for every distribution of the property in his or her care. This means not only keeping copies of bank statements and other documents but also keeping a personal ledger of all income and payments, including the amount, date and reason for each.
- Keep open lines of communication — It is common for beneficiaries to disagree with a fiduciary or even question his or her motives. Evasiveness or infrequent communication only makes this worse. Fiduciaries can do themselves a great service by communicating with beneficiaries or their representatives on a regular basis.
If you have been asked to act as a fiduciary and are unsure how to proceed, a Florida estates and trusts attorney can provide you with guidance and peace of mind.