FIDUCIARY DUTIES

A fiduciary duty is a legal term that describes a financial relationship between two parties.

In legal terms, it means that one party is obligated to act solely in the interest of the other party.Although this can take many forms, when it comes to estate planning, a fiduciary duty is said to exist between a trustee and a beneficiary, a principal and their agent, or an attorney and their client.

Fiduciary duties are one of the key elements of most any kind of an estate arrangement and when trusts are implemented. When a trust names a person to act as the trustee, then that person has a fiduciary duty to execute the trust in a way that is in the beneficiary’s best interest, also known as the principal. While the trustee has legal ownership of the trust and the assets contained in it, they are required by law to execute decisions that are in the best interest of the principal.

During the execution of a trust a fiduciary is expected, by law, to maintain loyalty, duty of care and confidentiality as well. This means that a fiduciary’s actions must be prudent and that they cannot engage in speculative practices or risky investments while administering a trust. They must also take into account not only current beneficiaries but future beneficiaries specified in the trust who may be directed to receive assets at some point in the future (i.e. a young child who cannot manage their own financial affairs).

Fiduciaries must also manage distributions appropriately and keep accurate and complete records related to income, those distributions and expenditures by the trust. As an adjunct to this, they must also handle all tax matters, ensuring that a healthy relationship with the IRS is maintained.

The assignment of a trustee is one of the most important financial planning decisions that a trustor can make. Finding someone who is trustworthy and can make smart and reasonable decisions ensures that a person’s heirs will be well taken care of long after a person passes away.

Dana and Associates LLC proudly serves Scottsdale, Mesa, Phoenix, Chandler, Old Town, Desert Ridge, Payson and surrounding Arizona communities.