Fiduciary – Refers to a person acting in a representative capacity for another. Examples are trustees (including estate trustees or executors), attorneys (under a power of attorney), agents, lawyers and other professionals.
Duty of Care – This describes one of the obligations fiduciaries owe to their principal (the person who appointed them, or the person whose affairs they are supposed to oversee).
Standard of Care – This refers to the level at which a particular fiduciary or class of fiduciary is expected to perform. It can vary between classes of fiduciary as well as particular fiduciaries. For example, the standard is not the same for a professonal estate trustee (i.e. trust company) compared to a lay person doing the same job and it is not necessarily the same between different professional groups (i.e. lawyer versus real estate agent).
No Self-Benefit – Fiduciaries are required to act according to the terms appointing them and the applicable law, and are not permitted to benefit personally from their role unless expressly permitted by the terms of their appointment or otherwise at law. Therefore, when appointing estate trustees or attorneys for property, it is important to be very clear about the terms of their appointment and any circumstances where they may be entitled to benefit personally such as receiving gifts, being able to buy property from the person who appointed them or that person’s estate, or being able to claim compensation different than what is prescribed by law. Without clear direction in the appointing document, the law may prohibit any form of personal benefit to the person who was appointed other than payment for services as specified by law.
Accountability – Fiduciaries are accountable to the person who appointed them and any others whose affairs they are supposed to be overseeing. In the case of estate trustees, trustees, and attorneys for property, this can mean being required to prepare and submitt financial reports to court in a form prescribe by law. This can be a difficult and expensive process particularly if the records were not maintained in the prescribed format from the start. At a minimum, fiduciaries need to be prepared at all times to answer informal inquiries about the conduct of their decision making – even persons acting as attorneys for personal care. Therefore, a process for tracking all relevant documentation and decisions should be set up as soon as possible. Professionals such as lawyers have access to software specifically designed to manage record keeping for estate trustees, trustees and attorneys for property and can be retained to take care of this task.
Personal Liability – Fiduciaries are personally liable for their decisions and can in some instances be requried to post security to be able to act. However, in some jurisdictions there is now a form of insurance available to protect certain types of fiduciaries. This should be investigated before beginning to act.
Acceptance of Appointment – In most cases there is no formal act required to accept an appointment as a fiduciary. Simply beginning to fulfill your role and holding yourself out to be the fiduciary, such as an estate trustee, can be enough to be deemed to have accepted. This can be problematic in the situation of estate trustees since once a person starts to act as an estate trustee they can only be removed by court order in most jurisdictions. Even when they have finished their administration they are still technically the estate trustee until they pass their accounts in court and are formally discharged. A person can renounce their appointment as estate trustee before beginning to act which does not reqire a court order.
Persons appointed to be the guardian of property or guardian of the person are an exception to the rule about accepting the appointment since there is a court application necessary for the appointment to take affect. Acceptance of the appointment is part of the process before an order can be obtained.