Estate planning attorneys often talk about fiduciary relationships. A fiduciary is a person who is authorized to act on behalf of another person in a matter requiring trust, loyalty, transparency, and many other duties. For example, when you make a will, you nominate someone to act your personal representative who would act as a fiduciary for your estate if probate is required. Similarly, if you have a durable power of attorney, when your agent chooses to act under the document, the agent is acting as fiduciary for you.
Other examples of Virginia fiduciaries are guardians who care for your minor children if you die prematurely, your agent who makes health care decisions for you under your advance directive, and a trustee for your trust. All of these roles require the fiduciary to act in a certain manner and fulfill certain special duties required by law. The law may allow some—but usually not all—fiduciary duties to be waived by the one creating the fiduciary relationship.
Duty of Care
All fiduciaries have a duty of care. This duty includes the fiduciary’s responsibility to make decisions that are reasonably prudent and to act in good faith. For example, if Joseph names Douglas an agent under Joseph’s power of attorney, then Douglas has a duty of care that requires him to not act recklessly or irresponsibly with Joseph’s property. If Douglas makes reckless investments and loses Joseph’s money as a result, Douglas’ actions might amount to a breach of the duty of care and Douglas might have to personally compensate Joseph for the loss.
Duty of Loyalty
The duty of loyalty means the fiduciary must not put its own interests above that of the person the fiduciary is supposed to be serving. In the context of a trust, for instance, the trustee has a duty of loyalty to all the trust beneficiaries. The trustee must not engage in self-dealing that benefits the trustee at the expense of the trust beneficiaries. And if the trustee is also a beneficiary, the trustee cannot favor its own individual interest above the interests of the other beneficiaries.
Duty of Full Disclosure
A fiduciary also has a duty to make certain disclosures. With respect to a will or trust, after the death of the individual who made the will or created the trust, the fiduciary typically needs to inform the beneficiaries of the document’s existence and their rights under it. A trustee may also need to make certain periodic accountings and disclosures to the trust beneficiaries. In other words, a fiduciary cannot intentionally withhold or hide information related to the interests of the person they are supposed to protect.
Waiver of Duties
There may be times when you would wish to waive some of your fiduciary’s duties if doing so would serve another purpose important to you. For example, you may waive the duty of prudent investing if you prefer a more aggressive approach to asset management and are willing to take the risks associated with the potential for higher earnings. In the context of long-term care planning, you may choose to allow your agent under your power of attorney to give away some of your assets—including to a family member who is your agent—if doing so would preserve more assets overall for your family and allow you to qualify for assistance in paying for your care.
We Can Assist With Fulfilling Fiduciary Duties
At Promise Law we do not take a one-size-fits-all approach to estate planning. You invite us into your world and tell us what is important to you, and we will discuss whether or how you may wish to waive certain duties for your fiduciaries if that is important to you. To begin your estate planning, contact Promise Law today.