A fiduciary is a person or organization that has a legal duty to act on behalf of, and in the best interests of, another person or persons. Fiduciaries must maintain the trust of the people they represent, acting in good faith and always putting the other people’s interests ahead of their own.
You may well become a fiduciary at some point in your life. How? If someone names you as the executor of his or her will, you will become a fiduciary when that person dies and you become the administrator of his or her probate estate. Likewise, if someone designates you as the trustee of a trust he or she establishes, you immediately become a fiduciary for purposes of managing the trust assets.
Fiduciary duties almost always have to do with managing money or income-producing assets. The precise duties you will perform as a fiduciary naturally depends on what type of assets you’re managing, for whom and under what circumstances. For instance, if you’re the trustee of a trust, the trust itself may specify what duties you must perform. If you’re the administrator of someone’s probate estate, your state’s laws regarding estates will determine your duties.
In all the actions you take as a fiduciary, everything must be for the benefit of the estate and its heirs or the trust and its beneficiaries. This does not mean, however, that you must perform your duties perfectly. Human beings make mistakes, and no one will sue you for breach of your fiduciary duty if you make one. This includes not only actual mistakes, such as incorrectly adding up a column of figures, but also mistakes in judgment. For example, if, after researching a particular stock, you decide to invest some of the trusts’ or estate’s money in it, but the stock fails to perform as the analysts expected, this does not constitute a breach of your fiduciary duty.
Taxes and Tax Returns
One of the most grievous mistakes you can make as a fiduciary, and for which someone almost assuredly will sue you for breach of your fiduciary duties, is missing a federal or state tax filing deadline. Many trusts and estates must file annual income tax returns, especially if they earned more than $600 in income during the calendar or fiscal year. An experienced estate planning lawyer in Elizabeth, NJ, like from The Law Office of Wade Suthard, P.C., can advise you of when you need to file such returns and which forms you must use. He or she can also help you fill out the forms and make sure they’re filed on time, accompanied by any required tax payments.