Fiduciary Defined

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What Does It Mean to Be a Fiduciary?

If you have been named as an agent under a Power of Attorney or a trustee of a trust as part of a loved one’s estate plan, you have been given a significant responsibility. In the eyes of the law, you are now a “fiduciary.” But what does that actually mean?

A fiduciary is a person who has a legal and ethical duty to act in the best interest of another person. It is the highest standard of care recognized by law, requiring unwavering loyalty and good faith. Understanding this duty is essential to protecting both your loved one and yourself from legal and financial mistakes.

The Fiduciary’s Primary Responsibility in North Carolina

While every state has its own standards, North Carolina has a unique approach to how a fiduciary should make decisions. The first priority is to make a decision that is consistent with what the person would have done for themselves. This recognizes that we are all unique individuals and don’t always act in our own “best interest.”

For example, if your mother always donated to a specific charity, even when her budget was tight, your duty as her agent would be to continue making those donations, as it is consistent with her known wishes. Only if you do not know what decision the person would have made should you then act in their objective “best interest.”

Know Your Role and Its Limits

A fiduciary’s authority is not unlimited. It is strictly defined by the legal document that appoints you. A common and costly mistake is for an agent or trustee to act outside the scope of their authority, which can result in their actions being legally voided and can even lead to personal liability.

It’s also critical to understand the difference between roles:

  • An Agent under a Power of Attorney is appointed to manage the affairs of an individual.
  • A Trustee is appointed to handle the trust administration for assets held within a trust.

These roles are not interchangeable. Being named as an agent in your mother’s Power of Attorney does not give you the authority to manage her trust. Similarly, these duties are distinct from those of court-appointed guardianships, which is another important fiduciary role. Only a properly appointed person can act in each specific capacity.

Guidance for Fiduciaries

Serving as a fiduciary is a profound act of trust, but it can also be a complex and challenging role. You are not expected to know all the answers.

If you are serving in a fiduciary capacity for someone and have questions about your responsibilities or need guidance on a specific decision, our attorneys can help. Call our office at (919) 256-7000 to schedule a consultation.