Estate planning has many elements. It’s not just about writing a will. You have many financial and legal decisions that need to be made. The people that advise you should put your interests about their own. While you can hope for the best when you get financial or legal advice, the only way to know if they are really bound by ethics is to ask whether they are a fiduciary.
What Is a Fiduciary?
A fiduciary holds the highest responsibility as an advisor. A fiduciary is legally obligated, as well as ethically, to put the client’s best interests forward. Fiduciaries cannot mislead clients. Fiduciaries have to disclose any conflicts of interest. A fiduciary must give all material facts when providing financial or legal advice.
In estate planning, the trustee is a fiduciary who must make decisions in the best interest for the beneficiaries of the trust. A lawyer is a fiduciary who must act in the best interest of the client. An appointed guardian over a child is a fiduciary and has a duty to act in the child’s best interest until the child reaches the age of majority.
Not Everyone Has a Fiduciary Responsibility
You may be dealing with many financial advisors as you go through your estate planning. Not every financial advisor is a fiduciary. An insurance agent may make recommendations on different policies without telling you that he or she is receiving compensation for a particular plan. Not all stockbrokers have a fiduciary duty. Some brokers may earn commissions on trades, giving them a conflict of interest if your finances include those trades. You always need to ask if your advisor has a fiduciary responsibility or not.
Get Fiduciary Responsibility In Writing
When choosing estate planning advisors and managers, find out who is really managing your investments and money. You want an investment manager who is a fiduciary and actually manages your money, not one who farms it out to another company. Ask your fiduciary about their experience and background. Choose a person who has experience outside of brokerage accounts and insurance agencies. Ask where the income comes from. A fiduciary collects income from the clients, not from outside sources which can create conflicts. You should expect to pay your fiduciary by the hour.
Make sure you are dealing with a fiduciary in estate planning.