Fiduciary roles come with significant legal and financial obligations. On Let’s Talk Legal, attorneys Cecil Harvell and Wes Collins discussed the responsibilities of executors, trustees, and agents under power of attorney, emphasizing the importance of seeking legal advice early to prevent costly mistakes.

Why Fiduciaries Must Seek Legal Guidance Early

Fiduciaries are entrusted with managing assets and financial decisions for others. A lack of legal guidance can lead to errors, disputes, and potential litigation. The attorneys shared an example of an executor who struggled with court procedures due to poor legal planning. Consulting an attorney early in the process helps ensure compliance with fiduciary duties and prevents unnecessary legal issues.

Who Are Fiduciaries?

A fiduciary is any individual with a legal duty to act in the best interest of another party. This includes:

• Executors – Responsible for administering an estate after someone passes away.
• Trustees – Manage assets held in a trust for beneficiaries.
• Agents Under Power of Attorney – Handle financial and legal matters on behalf of another person.

Each fiduciary must act with integrity, diligence, and in the best interests of the beneficiaries or principal.

Breach of Fiduciary Duty & Legal Consequences

Failing to uphold fiduciary responsibilities can lead to litigation. If a fiduciary’s actions are challenged in court, the burden of proof is on them to demonstrate they acted appropriately.

Common breaches include:

• Mismanagement of funds or property.
• Self-dealing or personal gain from fiduciary actions.
• Failing to act prudently with investments.

Implied Fiduciary Relationships & Family Dynamics

A fiduciary relationship does not always require formal documentation. In family situations—such as a child managing an elderly parent’s finances—an implied fiduciary relationship may exist. Courts recognize these relationships, meaning mismanagement can still lead to legal consequences even without a formal agreement.

The Importance of Communication & Transparency

To avoid disputes, fiduciaries should:

• Be transparent with beneficiaries about financial transactions.
• Communicate clearly with family members to prevent misunderstandings.
• Document all financial activities to protect against claims of misuse.

Asset Transfers & Legal Considerations

Transferring assets, such as deeding a home to children, has legal and tax implications. It can also impact Medicaid eligibility, making professional legal advice crucial before making major asset transfers.

The Prudent Investor Rule

When managing investments, fiduciaries must follow the prudent investor rule, which requires acting wisely and in the best interest of the principal. Risky or negligent investment choices could result in personal liability for the fiduciary.

Take the Right Steps as a Fiduciary

Acting as a fiduciary is a serious legal responsibility. Seeking professional legal guidance can protect assets, prevent disputes, and ensure compliance with fiduciary duties.