Choosing a Fiduciary, Attorney-in-Fact, or Agent: A Guide to Ensuring Proper Management of Your Financial Affairs

When it comes to managing your financial assets or making critical decisions on your behalf, selecting a fiduciary is one of the most significant decisions you can make. A fiduciary is an individual or institution legally obligated to act in your best interest, putting your needs above their own. This role can involve managing investments, handling estate planning, or administering trusts. Here’s a guide to help you navigate the process of choosing the right fiduciary for your needs.

Understanding the Role of a Fiduciary or Agent

A fiduciary’s primary responsibility is to act with the highest level of integrity and care. Unlike other financial professionals who might only have a suitability standard, fiduciaries are held to a stricter duty of loyalty and prudence. This means they must:

• Act in Your Best Interest: Prioritize your financial well-being over any personal gain or external influence.
• Disclose Conflicts of Interest: Fully inform you of any potential conflicts that could affect their decision-making.
• Provide Transparent Advice: Offer clear and comprehensive information regarding their decisions and actions.
• Trustworthiness: The agent should be someone you trust implicitly, as they will be making decisions and handling matters that could affect your financial and personal well-being.
• Responsibility: Choose someone who is responsible and capable of managing complex tasks. This person should be organized and reliable.
• Understanding: Ensure that the agent understands your wishes and values, and is willing to follow them. Clear communication about your expectations and preferences is crucial.
• Availability: Your agent should be someone who is available and willing to take on the role when needed. They should be able to dedicate time to manage your affairs effectively.
• Knowledge and Skills: Depending on the scope of the POA, it might be beneficial if the agent has some expertise or knowledge relevant to the responsibilities, such as financial or legal matters.
• Willingness: The person you choose should be willing to take on the role. It’s a significant responsibility, and they should be prepared for it.
• Location: If the agent is required to handle in-person tasks, consider their location in relation to where the POA will be exercised. A local agent may be more practical for certain duties.
• ·  Legal and Ethical Considerations: Ensure the agent is aware of their legal and ethical obligations. They should act in your best interest and adhere to any legal requirements.
• ·  Alternative Agents: Consider naming an alternate agent in case the primary agent is unable or unwilling to fulfill their duties. This ensures that there is a backup plan in place.
• ·  Communication: Regularly communicate with your agent about your preferences and any changes in your circumstances. This helps ensure they are well-informed and prepared to act as you would wish.

Types of Fiduciaries

1. Financial Advisors: These professionals manage investments and provide financial planning advice. They should be certified, such as a Certified Financial Planner (CFP), and adhere to fiduciary standards.
2. Trustees: Appointed to manage trusts, trustees are responsible for distributing assets according to the terms of the trust and in the best interest of the beneficiaries.
3. Personal Representatives (a/k/a Executors or Administrators): Named in a will, personal representatives handle the estate’s administration, ensuring that debts are paid and assets are distributed according to the deceased’s wishes.
4. Guardians: For minor children or incapacitated adults, guardians make personal and financial decisions on their behalf.

Criteria for Selecting a Fiduciary

When choosing a fiduciary, consider the following:

1. Expertise and Experience: Ensure the fiduciary has relevant experience and qualifications in managing the specific aspects of your financial or personal affairs.
2. Reputation and References: Research their reputation and seek references or reviews from other clients to gauge their reliability and effectiveness.
3. Compatibility and Communication: Choose someone whose values align with yours and who communicates clearly and effectively.
4. Fees and Compensation: Understand how the fiduciary will be compensated. For financial advisors, this might involve management fees or commissions. Transparency about fees is crucial to avoid potential conflicts of interest.
5. Legal and Ethical Standards: Confirm that the fiduciary adheres to all relevant legal and ethical standards. Professional credentials and memberships in industry organizations can be indicators of adherence to high standards.

The Selection Process

1. Define Your Needs: Assess what specific duties the fiduciary will need to perform and identify individuals or institutions with the relevant expertise.
2. Interview Candidates: Meet with potential fiduciaries to discuss their approach, experience, and how they handle fiduciary responsibilities.
3. Review Documentation: Examine any legal agreements, fiduciary contracts, or relevant documentation before finalizing your choice.
4. Consult an Attorney: If necessary, seek legal advice to ensure that the fiduciary arrangement is properly documented and aligns with your legal and financial goals.

Conclusion

Selecting a fiduciary is a critical decision that impacts your financial security and personal well-being. By carefully evaluating candidates based on their qualifications, reputation, and alignment with your goals, you can ensure that your interests are well protected. Taking the time to make an informed choice will help safeguard your assets and provide peace of mind.

Todd Miller is a monthly contributor and regularly writes and speaks on various legal topics including estate planning, probate, and elder law. He formed the Law Office of Todd Miller, LLC, 1305 Southwest Blvd., Suite A, Jefferson City, Missouri in 2006. He has been recognized as 2016 Adviser of the Year by GolfInc; Golf Tax Consultant of the Year by Boardroom Magazine three times; and “10 Best” attorneys by the American Institute of Family Law Attorneys and “10 Best” attorneys by the American Institute of Criminal Law Attorneys. Mr. Miller earned his juris doctorate degree from the University of Missouri School of Law in 1999 and graduated with honors from Lincoln University in 1991. You may find him at www.toddmillerlaw.com (573) 634-2838 or on Facebook, LinkedIn, and Twitter.