Experienced, Compassionate Legal Guidance For The Issues Of Aging

Mistakes that can trigger legal consequences for fiduciaries

On Behalf of | Jul 29, 2021 | Financial Planning, Guardianships

Making financial decisions for other people is not a responsibility to take lightly. And in some cases, it proves to be a burden that overwhelms individuals and leads to some missteps.

These mistakes can have costly ramifications for the fiduciary who makes them and the person whose finances are being managed. Thus, knowing and avoiding common mistakes can be crucial for anyone serving in this capacity.

Mistake: Putting your interests ahead of theirs

If you are a guardian or conservator, this role means that you will manage another person’s finances. You may be paying bills, selling a home or deciding what type of facility they will receive care in if they become ill.

This position can mean making decisions that you would not make for yourself. However, a fiduciary must make choices that align with the other person’s best interests, not their own.

If a fiduciary breaches this duty by making financial decisions that align with their interests instead of the other person’s, they can face removal and possible financial penalties.

Mistake: Failing to keep up with duties

Fiduciary duties can be complicated; they can be time-consuming and stressful. In some cases, they become overwhelming, and a person can no longer keep up with them.

There are also instances in which a fiduciary does not take their duties seriously and ignores them. They may neglect the other party, fail to pay bills or cause passive financial loss.

Failing to keep up with the duties required of a fiduciary can result in penalties.

Mistake: Not disclosing conflicts of interest

A conflict of interest is a situation that compromises a person’s ability to act solely on behalf of their principal, ward or beneficiary. For instance, a conflict of interest can occur when the same person serves as a fiduciary for multiple parties with different interests.

If a conflict of interest exists, the fiduciary must disclose it. The conflict does not automatically prevent a person from serving as a fiduciary. Still, it can require other measures to ensure it does not affect their ability to fulfill their duties.

Whether a family member or professional provides fiduciary services, avoiding these mistakes will be crucial to prevent legal disputes and financial losses.

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