The Role of a Fiduciary

"Fiduciary" is a general term for someone who manages another person's financial or personal affairs. The fiduciary's specific role depends on the legal agreement he has entered into. After assuming the role of fiduciary, he is legally bound to uphold the role unless he legally transfers it to someone else, with serious financial or legal consequences if he fails to uphold his obligations.

Managing Financial Assets

Fiduciaries typically manage financial assets for other people. The trustee is a common type of fiduciary. She manages a trust fund, making investments, keeping records of the fund's performance and issuing money to the beneficiaries as the agreement stipulates. Often the trust fund aims to ensure that the beneficiary will always have secure finances, which means the trustee can only dispense specific amounts to him at specific times. The trustee may need to follow terms agreed upon with the grantor, who initiated the trust, or the trustee might have authorization to manage and dispense the funds as she sees fit. Financial planners whom others depend on to manage their retirement or insurance plans can also be considered fiduciaries.

Managing Personal Affairs

Some fiduciaries, called guardians, manage another person's personal affairs and spending as well as overall finances. The person the guardian assists is called his ward. The guardian must consider the ward's wishes when making decisions for her, as long as the ward's wishes represent her best interest. Frequently the ward and guardian are related. A son or daughter might become their parent's legal guardian if the parent becomes incompetent to manage her own affairs, for instance. Likewise, an aunt could become her underage niece's legal guardian if the parents are deemed incompetent. In this case, the guardian would typically assume the role of parent. The responsibilities of an adult's guardian may include helping the ward decide where to live, paying for utilities, managing her finances, giving her a spending allowance and coordinating care such as skilled nursing, if necessary.

Carrying Out Wishes

A fiduciary may also carry out another person's wishes after that person dies. A personal representative or executor carries out another person's will. This individual could be an attorney, trusted relative or friend. An attorney also assumes a fiduciary role when advocating for a client in court, as the client trusts the attorney to act in his best interest, safeguarding his freedom and property.

Delegating Responsibilities

A fiduciary may not have the expertise or the time to manage someone else's affairs. In this case, he must delegate the responsibilities to competent parties. For example, a named fiduciary is entrusted with another person's finances, but may select a trustee to manage the finances. Members of a board of directors are also fiduciaries who act in the best interest of an organization's stakeholders. They delegate responsibilities to staff in the organization. A fiduciary who delegates responsibilities must still monitor how well the other party manages them, and find someone new to manage them if necessary.