Have you stepped up to help friends or family in need? Someone who could handle everything but now cannot? If you manage their money, you are probably a fiduciary. That is a special relationship of trust and confidence.
Fiduciary relationships include agents under a power of attorney, trustees under a revocable trust, court appointed guardians, representative payees, and VA fiduciaries. Fiduciary relationships typically begin with a signed piece of paper, e.g., a power of attorney, a trust agreement, a court order, or an appointment form. Two signatures on a bank or brokerage account may be enough to create a fiduciary relationship.
Informal fiduciary relationships are also possible. There is no piece of paper, but someone trusts you and relies on you.
A fiduciary, formal or informal, must be diligent, trustworthy, honest, and act in good faith. A fiduciary has duties: i) act only in the beneficiary’s best interest, ii) manage their money and property carefully, iii) keep their money and property separate from his or her own, and iv) keep good records and communicate actions. If not, the fiduciary may be removed, sued, have to repay money, and go to jail. The cardinal rule: “It’s not your money!” These standards and penalties apply regardless whether the fiduciary is unpaid, untrained, and inexperienced.
Some fiduciaries have additional requirements. AARP Texas and Texas Appleseed have prepared five toolkits that help. All are available, for free, at www.protecttheirmoneytx.org. Each toolkit is an excellent guide, with real-world examples, practical insights, and resources that even a professional fiduciary could appreciate.
The Agents toolkit points out that once an agent accepts a power of attorney, an agent may assume fiduciary responsibility for all the beneficiary’s business. To make careful decisions about one thing, the agent needs to know about everything. The Agents toolkit suggests that a new agent make a list of all the beneficiary’s money, property, and debts, change locks, choose a financial advisor, buy insurance, and collect debts.
Fiduciaries must be more careful with the beneficiary’s money and business than with their own. If this is too much responsibility, each toolkit explains how to step down.
No fiduciary is an island. Each must deal with other fiduciaries, government benefits, and problems with family and friends. The toolkits explain how to respond, and how to engage professionals that can help.
Hats off to AARP Texas, Texas Appleseed, their Advisory Committee, and Baker Botts for their pro bono support in creating these toolkits.