Taking on fiduciary duties in California requires careful preparation and a clear understanding of your responsibilities. Whether you are a trustee, executor or corporate officer, you must act in the best interests of those you serve. Here is how to get ready for this vital role.
Understand your legal obligations
In California, your duties as a fiduciary include:
- Care: You must exercise utmost care when making decisions concerning the trust.
- Loyalty: You must act in the beneficiary’s best interests.
- Confidentiality: You must maintain confidentiality regarding all information related to the beneficiary and not use any of it for personal gain.
- Good faith: You must act within the law and not intend to commit illegal acts.
- Prudence: You must not only be knowledgeable but also be critically cautious of risks.
- Disclosure: You must be fully transparent and honest in all your actions.
Another thing to understand as a fiduciary is that most of these duties require avoiding conflicts of interest. It may be confusing at first to determine which actions could be a conflict of interest in your duties, but this document might help you identify and disclose these conflicts of interest.
Study relevant laws
Learn about California laws governing fiduciary duties. Review the California Civil Jury Instructions (CACI) to understand how courts interpret fiduciary responsibilities. Once you accept the appointment as a fiduciary, you cannot claim ignorance to avoid liability. The law presumes your acceptance, which means you know, plan to learn, or consult professionals to remedy your lack of knowledge.
Learn basic financial management
You cannot manage a trust well without a basic understanding of finance concepts. For one, your primary duty in a trust is preserving wealth, not growing it. For another, you cannot have an outsized risk appetite. Since your main goal is wealth preservation, you must focus your strategies on conservative and prudent investments.
Consider seeking professional advice
Seek guidance from attorneys and financial professionals to ensure you follow all the rules. There is no shame in admitting you need help in performing your duties. Seek help to perform your duties to the best of your ability. The wise know their limitations, while the fool pretends they are wise.