Fiduciary Defined

You’ve been appointed as a loved one’s agent and are being told you have a Fiduciary duty to act on their behalf. What does that even mean?! What is an Agent’s (appointed under a Power of Attorney) responsibilities? You have authority to make decisions but what decisions and how?

The General Durable Power of Attorney (or any Power of Attorney document) does not give instructions on how to make decisions. Each state sets their own Fiduciary standards. In North Carolina the priority is that the decision you make is consistent with the decisions the Ward has made in the past or would make under the current circumstances. Keep in mind that it might not be in the Ward’s best interest – only consistent with what they would do if they could act. If the decision the Ward would make is unknown to the fiduciary, then the fiduciary should act in the Ward’s best interest. A lot of states instruct the Fiduciary to act initially on the best interest of the Ward, however, North Carolina recognizes that we are all different and unique and do not always act in our own best interest.

A fiduciary has a responsibility to stay within the limitations the document appointing them authorizes. Many agents never read the document or make assumptions about their legal authority and make mistakes by acting outside the scope of the document. This can result in a void or voidable action and can be illegal at times, particularly if the action is self-serving. Hence, an agent should always know the extent and the limitations of their authority under the legal document.

Trustees are also fiduciaries. The nice thing about Trusts is that they give instructions on how to make decisions. And it should be noted that an agent under a Power of Attorney has no authority under a trust. Simply put, if your Mother is a Trustee of a trust and she appoints you as her agent under a Power of Attorney, you do not have the legal authority to act on behalf of the trust unless or until you are appointed as a trustee.

If you are serving in a Fiduciary capacity for someone and have questions or need some guidance, call our office to schedule an appointment!