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Are You a Fiduciary? The Pitfalls of Being Trusted Too Much

It's not uncommon for the estates of elders to be looted or taken advantage of by fiduciaries of the estate. Take, for example, this sad story coming out of Santa Clara, California.

Backhouse Fiduciary Services, an institution that managed several trusts and other financial asset planning tools, is under investigation by the FBI for the reported loss of $17.3 million from clients' accounts, according to The Mercury News.

The FBI is currently investigating a key employee of the company, writes

This isn’t the first such case in the Bay Area of California. In fact, The Mercury reports that a Northern California judge was arrested on suspicion of stealing his neighbor’s assets that he oversaw through a durable power of attorney!

The term “fiduciary” refers to a person who is in a position of trust. An attorney, for example, can have a fiduciary relationship with the client. Similarly, a trustee of a trust will have a fiduciary relationship with a beneficiary of the trust.

In estate planning, perhaps the most important use for the word “fiduciary” comes into the context of an executor or an administrator of an estate. The administrator or executor of the estate is in a position of trust with the heirs and beneficiaries of the estate.

As such, the heirs and beneficiaries of an estate place a certain confidence in the executor and the executor (or administrator) is bound to act in the best interests of the beneficiaries.

The powers and duties of a fiduciary in New York are elaborated in the state code. It’s a delicate relationship and can come with some legal liability.

It boils down to this — if you’ve been appointed in charge of another’s assets, be it in a power of attorney or as the executor of a will, think twice. Ask yourself if you’re up for the job because it’s a heavy responsibility. Tread carefully.

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