Mature Money: What to Look for in a Fiduciary

This is the first installment of the new Mature Money series, which will address financial topics relevant to seniors and those who care for them. In this article, financial expert Sheri Samotin describes the roles and responsibilities of a fiduciary and explains what you should consider when selecting one.

What is a fiduciary?

A fiduciary is a person who is trusted to act in the best interest of another person in a high-stakes situation that almost always involves money. The fiduciary assumes the responsibility to carry out the instructions in the written appointing documents or, where appropriate and allowed by law, to use substituted judgment or the best-interest standard to handle an the person’s affairs.

Most people name a family member or friend to serve in fiduciary roles. Professional fiduciaries are often needed because it cannot be assumed that a spouse, partner, sibling, or child will be available and able to serve when the time comes. Fiduciaries are usually named in advance, but when this doesn’t occur or when those named cannot or will not serve, the Court will name a fiduciary.

How does a fiduciary make decisions?

Fiduciaries are expected to use substituted judgment whenever possible. This means that the fiduciary will “step into the shoes” of the principal to make the decisions that the principal would have made. If it is impossible to determine what the principal would have done then it is acceptable to use a standard of best interest. In this case, the fiduciary makes the decision based on what he or she thinks is in the principal’s “best interest.” Fiduciaries should never make decisions based on what he or she would do for him- or herself.

What should I look for when choosing a fiduciary?

Ideally, a fiduciary will exhibit The Five A’s: Able; Affable; Available; Above-board: and, Anchored.

The Five A’s of Choosing a Fiduciary

An able fiduciary is one who possesses the skills and knowledge necessary to accomplish the necessary tasks. In addition, an able fiduciary will exhibit excellent attention to detail and not let anything fall through the cracks. An able fiduciary will also be resourceful; it is often necessary to be creative in solving problems when you lack full information.

The affable fiduciary will have strong people skills and be easy to get along with. He or she will recognize that it is easier to get things done with honey than with vinegar. In addition, the affable fiduciary will be able to deal with the many sources of stress that come with the job.

While it might seem obvious, too many people appoint a fiduciary who doesn’t have the time or inclination to take on the role. The available fiduciary will have the time needed to do the job well, which is often considerable. In addition, the available fiduciary will be geographically proximate to the principal or the assets under management or will be in a position to travel to be where needed on a regular basis. Finally, the fiduciary should have the right attitude and be available emotionally, as well as physically.

Since a fiduciary by definition holds a position of trust, it is critical that he or she be an above-board fiduciary in every way. The fiduciary must have honest, straight-forward, and professional dealings on behalf of the principal. Sometimes this is very difficult for family members who have been named as fiduciaries because they have to deal with the competing demands and opinions of other family members.

Finally, the best fiduciaries are anchored fiduciaries. They bring a measure of stability to the situation and think things through with a level head. If someone has disarray or drama in his or her own life, it is often difficult to serve as the calming influence that is expected of a fiduciary.

It is important to be able to recognize when the fiduciary should take over decision-making and to help facilitate that transition. It is critical to keep an eye on the manner in which the fiduciary makes decisions and speak up if you feel the fiduciary is not living up to the substituted judgment or best interest standards. You should ask for references or advice from an objective third party professional to help you find a fiduciary.

sheri samotin

Sheri Samotin is President of LifeBridge Solutions and author of Facing the Finish: A Road Map for Aging Parents and Adult Children. She is also the California State Coordinator for Eldercare Matters. Sheri provides daily money management services; individual coaching; and online, on-demand coaching programs on this topic to her clients.

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