What is "Fiduciary Duty?

If you've ever been asked to be someone's power of attorney, serve as executor of a will, or manage a trust, you've probably heard the phrase "fiduciary duty." But what does that actually mean? And why does it matter for you and your family? Let's break it down in plain English.

What Is Fiduciary Duty, Really?

Think of fiduciary duty as a promise – a legal promise – to put someone else's interests ahead of your own. The word "fiduciary" comes from the Latin word for trust, and that's exactly what it's about: trust. When you accept a fiduciary role, you're essentially saying, "I will make decisions for you as if I were making them for myself, but I'll always choose what's best for YOU, not me." It's one of the strongest legal obligations out there.

Who Are Fiduciaries in Real Life?

You might be surprised how often fiduciary relationships come up in everyday life. Here are some common examples that Ohio families encounter:

Executors and Personal Representatives are probably the most common fiduciaries families deal with. When someone dies and leaves a will, the executor has a fiduciary duty to the beneficiaries. If there is no will, then it is the administrator who has the same duty. They have to manage the estate, pay debts, and distribute assets according to the will or Ohio law – all while putting the beneficiaries' interests first.

Power of Attorney Agents have fiduciary duties too. If your mom gives you power of attorney to help with her finances, you can't use that authority to benefit yourself. Every decision you make with her money or property must be in her best interest.

Trustees manage trusts on behalf of beneficiaries. Whether it's a simple revocable trust or a more complex arrangement, trustees must manage trust assets carefully and always act in the beneficiaries' best interests.

Guardians who are appointed by the court to care for someone who can't manage their own affairs also have fiduciary duties. They're responsible for making financial and sometimes personal decisions for someone else.

Even some business relationships create fiduciary duties, like when business partners manage company assets together, or when financial advisors manage client investments.

What Does Fiduciary Duty Look Like in Practice?

Let's get practical. If you're someone's fiduciary, here's what you're signing up for:

Always Act in Their Best Interest

This seems obvious, but it's harder than it sounds. Let's say you're the executor of your father's estate, and you find out he owned a house that your family has always loved. You might want to buy it for yourself at a below-market price, but that would violate your fiduciary duty. You have to make sure the estate gets fair market value, even if that means you can't afford to keep the house in the family.

Handle Money and Property Carefully

You have to manage someone else's assets as carefully as (or more carefully than) you'd manage your own. This means:

• Keeping accurate records of all transactions
• Making smart investment decisions
• Paying bills on time
• Not mixing their money with yours
• Getting professional help when you're in over your head

Be Completely Honest

No secrets, no surprises. If there's a conflict of interest, you have to disclose it. If you make a mistake, you have to own up to it. If there are risks involved in a decision, you have to explain them.

Follow the Rules

Whether it's the terms of a will, the language in a trust document, or Ohio state law, you have to follow the legal requirements. You can't just wing it or do what seems right to you.

A Real-Life Example

Let me give you a concrete example. Sarah is the trustee of her late husband's trust, which was set up to provide for their adult son, Mike, who has special needs. The trust has $200,000 in it.

Mike asks Sarah if he can have $50,000 to buy a sports car. Sarah knows that Mike doesn't really need a sports car, and that the money would be better saved for his ongoing care needs. Even though it would make Mike happy in the short term, Sarah's fiduciary duty requires her to say no because spending that much on a car isn't in Mike's long-term best interest.

But let's say Mike needs $15,000 for a specialized therapy program that could really help him. Even if Sarah thinks the therapy is expensive or isn't sure it will work, if it's a reasonable medical expense that could benefit Mike, her fiduciary duty might require her to approve it.

The Heavy Responsibility

Here's something important to understand: being a fiduciary is a big deal legally. If you mess up – whether intentionally or by accident – you can be personally liable for any losses you cause.

Let's say you're managing your elderly mother's finances under a power of attorney, and you decide to invest all her money in your friend's startup company because you think it's a great opportunity. If the company fails and your mother loses her life savings, you could be personally responsible for paying her back every penny, even if you had good intentions.

Common Ways People Mess Up

Unfortunately, fiduciary duty violations happen more often than you might think. Here are some common mistakes:

Using the money for yourself. This is the big one. Whether it's "borrowing" money from a trust or using someone's credit card for your own expenses, using their assets for your benefit is almost always a violation.

Making risky investments without proper research. Your brother might have given you great stock tips, but investing someone else's money based on hot tips rather than careful analysis can violate your fiduciary duty.

Not keeping good records. If you can't account for where the money went, you're in trouble. Courts expect detailed records of all transactions.

Not complying with deadlines. Courts have deadlines, the IRS has deadlines, and there are important elections and things that must be done in a timely fashion. If you don't have the time to devote to your responsibilities, be honest and let someone else do it.

Mixing funds. Putting someone else's money in your personal bank account, even temporarily, is a no-go. Their money needs to stay separate.

Not getting help when you need it. If you're in over your head, you have a duty to get professional help. Trying to muddle through when you don't know what you're doing can cause serious problems, both for you and for the person you are trying to help.

How This Protects Families

Fiduciary duty exists to protect people when they're vulnerable. When someone is dying and can't manage their own estate, when they're getting older and need help with finances, or when they've set up a trust for their children's future – these are all times when people need someone they can trust absolutely.

The legal framework of fiduciary duty gives families confidence that the person they're trusting will actually deserve that trust. It also gives them legal remedies if things go wrong.

What Happens If Someone Breaks Their Fiduciary Duty?

If a fiduciary violates their duty and causes financial harm, they can face serious consequences:

• Personal liability for any losses they caused
• Removal from their position
• Legal fees (sometimes they have to pay both sides' attorney fees)
• Criminal charges in cases of theft or fraud

But here's the thing – courts understand that honest mistakes happen. They're much more forgiving of someone who tried their best and made an error in judgment than someone who was careless or, worse, trying to benefit themselves.

When to Get Professional Help

If you've been asked to serve as someone's fiduciary, don't be afraid to ask for help. Estate planning attorneys, accountants, and financial advisors can provide guidance to make sure you're meeting your obligations.

At the Law Offices of Laura Blumenstiel, we regularly help fiduciaries understand their responsibilities and navigate complex situations. It's much better to ask questions upfront than to find out later that you've made a costly mistake.

The Bottom Line

Fiduciary duty isn't just legal jargon – it's a practical framework for making sure people are protected when they need help managing their affairs. If you're asked to serve as someone's fiduciary, take it seriously, get help when you need it, and always remember: it's not about what you would want – it's about what's best for them.

Understanding fiduciary duty helps protect both the people who need care and the people who provide it. When everyone understands the rules, families can navigate difficult times with confidence and trust.