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What’s a fiduciary look like?

By Jennie L. Phipps · Bankrate.com
Tuesday, October 29, 2013
Posted: 4 pm ET

If your aging mother gives you power of attorney or even just adds you to her checking account so that you can pay her bills occasionally, you have become a fiduciary. That means you have an ethical -- and legal -- responsibility to act in her best interest.

"Lay fiduciaries take on the task with the best of intentions, but the responsibilities can seem overwhelming," says Nora Dowd Eisenhower, assistant director for the Office for Older Americans at the Consumer Financial Protection Bureau, or CFPB.

Today the CFPB introduced four guides written to help financial caregivers understand their responsibilities and how to carry them out. Eisenhower estimates that 22 million people in the United States have taken on these kinds of formal and informal responsibilities, including simply agreeing to hold power of attorney for a spouse or someone close to them in the event that it becomes necessary to make a financial decision on their behalf. Most take on these retirement-related responsibilities with no training and no understanding of what it is that they could be called upon to do.

"We hear a lot of stories about malfeasance on behalf of fiduciaries. We don't think most are criminals -- just people who don't know the rules of the road and who could use a little help," Eisenhower says.

The CFPB's four guides are written to provide insight for:

  • People who have been given a power of attorney to make financial decisions for someone else.
  • Those who have been appointed by a court to be a guardian or conservator of property.
  • Someone who has been named a trustee under a revocable living trust.
  • A person who has been appointed by a government agency to manage income benefits, such as Social Security or veteran's assistance, for someone.

Eisenhower says there is a lot of overlapping content among the booklets, but there is also unique information about each situation. Here are the main things that all fiduciaries should know about their responsibilities:

Act in the person's best interest. You can't use their money yourself or lend it to others. You should also avoid conflicts of interest. The booklets provide examples of what they can be.

Manage money and property wisely. That includes paying bills on time, making careful investment decisions and generally protecting the assets.

Keep assets separate from your own. That includes avoiding joint accounts that don't clearly identify whose money is whose.

Keep good records. The fiduciary should keep accurate records and avoid paying in cash so that there is a clear accounting of all transactions.

These retirement planning booklets are free, and they can be downloaded from ConsumerFinance.gov. Click on the blog post "Managing someone else's money."

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