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Thursday, October 6, 2016

What are the Duties of a Fiduciary?

Successor Trustees and Personal Representatives are sometimes called “fiduciaries” because the law imposes a high duty of loyalty toward beneficiaries, creditors, the IRS, or other interested parties to the trust or estate.  Simply put, a fiduciary is required to put the interest of others ahead of the interest of themselves as a fiduciary.  This can be a difficult task because often a fiduciary is also a beneficiary or creditor of the estate or trust and has inherent biases toward or against beneficiaries or creditors.

Here is a list of some of the specific duties of a Successor Trustee or Personal Representative:

  1. A fiduciary has a duty to administer the trust or will in accordance with its terms.  This means managing and/or distributing the property of the trust or estate to the beneficiaries in a manor directed by the trust or will.
  2. Pay any known creditors and taxes due.  A fiduciary must file an income tax return by April 15th of the year following the year of death of the Trustmaker or Testator for any income earned during the portion of the year that the decedent was alive.  The fiduciary must also file tax returns for the trust or estate reporting any income earned by the trust or estate during the period of administration.
  3. A fiduciary must act in the best interests of the beneficiaries and creditors, and not in the fiduciary's own self-interest.
  4. A fiduciary has a duty to supervise the activities of other professionals hired to help manage the trust or estate, including attorneys, investment advisors, and accountants.
  5. A fiduciary has a duty to keep records and provide an accounting to the beneficiaries and creditors.
  6. A fiduciary must provide information to beneficiaries and creditors, including a copy of the will or trust documents; financial information, including assets of the estate or trust;  transactions conducted by the fiduciary; tax returns filed; and compensation paid by a fiduciary to themselves.
  7. A fiduciary has a duty to take control, manage, invest, and protect all property of the estate or trust during the period of administration.  This means investing assets, managing real estate, making sure that real estate or vehicles are properly insured, and that assets are “productive” as well as prudently invested.
  8. A fiduciary must be impartial. This means that a fiduciary cannot treat some beneficiaries better than others and give them special benefits at the expense of others.  When family members are involved, it is not unusual that the fiduciary likes some of the beneficiaries more than others and wants to make sure that some beneficiaries get special treatment. This is not allowed.
  9. Where there are co-fiduciaries serving, they must account for the activities of both individuals.  This means there must be a high degree of cooperation between co-fiduciaries.  If they do not get along and communicate, there will be serious problems trying to administer the trust or estate. 
  10. A fiduciary has a duty to act in good faith. This means acting in a transparent and honest manner with everyone involved.





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Foley, Foley & Pearson, P.C. is a full service Estate Planning law firm. We offer our clients services in Probate Administration, Estate Taxes, Wills, Trusts, Disability and Incapacity Planning, Estate Administration, Corporate and Business Law, Business Succession Planning, and Planned Giving and Charitable Bequests.