Asset protection is crucial for anyone at any stage in life. Simple planning tools and strategies can shield your assets from judgments, lawsuits and taxes. A fiduciary has a duty to the principal that must come before their interests. Any decisions that benefit the fiduciary over the principal may be considered a breach of fiduciary duties.
Divorce
Following divorce, each spouse is entitled to an undivided stake in one-half of the joint estate. The other spouse may have broken a fiduciary obligation to that spouse if their acts or inactions undermine the other’s community property stake. Therefore, the hurt spouse has a claim for the breach against the offending spouse. Each spouse must reveal their assets and obligations during the divorce procedures. It is essential to always be open and honest about your financial situation. Unfortunately, it happens frequently for one or both sides to mismanage or conceal community resources. It can be challenging to present adequate evidence to demonstrate the presence of a fiduciary obligation violation. Therefore, you should seek the counsel of an experienced lawyer from https://www.garwoodfamilylaw.com/ for guidance on these issues.
Trustee
A trustee is in charge of overseeing a trust fund. Typically, this is done by an individual or business not affiliated with the financial institution that manages the asset. They could be friends, family members, or independent companies specializing in this type of work. Any potential trustee needs to understand the responsibilities involved before assuming this role. They must be aware that any breach of fiduciary duty they commit could result in their liability.
The primary duties include:
- Acting upon the grantor’s instructions.
- Maintaining a high standard of care in the management of the assets.
- Dealing impartially with beneficiaries.
Trustees must also communicate with the beneficiaries and prepare tax-related forms and filings. They must be able to make distributions that consider each beneficiary’s current and future needs, as well as other sources of income. They must also disclose any conflicts of interest.
Power of Attorney
Powers of attorney confer authority to handle financial or legal affairs. These documents can be very broad in scope and duration or limited to a specific type of matter (general, durable, non-durable, or springing). Limiting the scope of a power of attorney to a particular kind of issue limits any potential conflicts of interest. The agent or attorney-in-fact acting under a power of attorney is considered a fiduciary. As a fiduciary, this person is held to the highest standards of honesty, fair dealings, and undivided loyalty to the Principal.
Breaches of fiduciary duty can be difficult to detect, especially when the agent is a close family member such as a child or sibling. Involving an estate planning professional when setting up POA documents is often best. A skilled attorney can draft documents that limit the ability of an agent to make self-dealing or illegal decisions and ensure that your POA documents include safeguards against exploitation.
Guardian
A fiduciary relationship may exist between a person or entity, known as the trustee, and a beneficiary. For example, a parent might create a trust to administer assets their children inherit when they die. The trustee is legally the legal owner of the property and will have a fiduciary duty to manage those assets to benefit the beneficiaries. When a family member becomes incapacitated, the court will appoint someone to care for them and their financial affairs. A guardian will decide about housing, medical care, and other support services. They will also have a duty to report on the condition of their ward to the court once per year. In this role, a guardian cannot engage in impropriety or self-dealing, which means they must avoid situations where they might have some private interest that conflicts with their duties to the person under their guardianship. For instance, a guardian should only rent or buy real estate they would use personally or sell non-cash assets after first obtaining court approval.
