The concept of fiduciary duty of loyalty plays a crucial role in estate planning. Whether you are creating an estate plan or a fiduciary in someone else’s plan, understanding this principle is essential. Knowing what it means and what it entails may help you carry out your duties more effectively.
What is the fiduciary duty of loyalty?
At its core, the fiduciary duty of loyalty requires you to act in the best interests of the person or entity you represent. It means putting their interests above yours. In estate planning, this typically applies to trustees, executors and guardians.
As a fiduciary, one of the expectations is for you to make decisions that benefit the estate or beneficiaries. Those decisions might not be advantageous to you personally.
An example is if you are a trustee managing investments for a trust. It would be best if you chose investments suitable for the beneficiaries’ needs, not ones that might earn you higher commissions. This duty demands that you put aside personal gain. Instead, duty requires you to focus solely on fulfilling the wishes of the person who created the estate plan.
Why it matters in estate planning
The fiduciary duty of loyalty is essential in estate planning for the following reasons:
Protection of vulnerable parties
Estate plans often involve minors, elderly individuals, or others who may not be able to fully protect their own interests. The duty of loyalty ensures that you prioritize their needs.
Fulfillment of the testator’s wishes
By adhering to this duty, you help ensure the fulfillment of the deceased person’s final wishes as intended.
Fair distribution of assets
This principle helps prevent conflicts of interest that could lead to unfair distribution of estate assets.
Maintaining family harmony
Making decisions based on the estate plan rather than personal preferences lets you help avoid family disputes over inheritance matters.
If you are a fiduciary in an estate plan, it is essential to remember that your actions should always align with the best interests of the beneficiaries and the plan’s intent. Consider consulting an experienced attorney to help you understand your duties and responsibilities.