Can Any Person Serve as a Fiduciary? Eligibility Requirements

A fiduciary is someone responsible for acting in another person’s best interest, such as a trustee, guardian, financial advisor or executor of a will. Whether someone can serve as a fiduciary depends on the role, qualifications and any legal or institutional rules that apply. In many situations, a fiduciary does not need to hold a professional license, but they must be able to meet important legal and ethical duties required by the position.

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What Is a Fiduciary?

A fiduciary is a person or entity legally and ethically obligated to act in the best interests of another party. Fiduciary duty is the highest standard of care under the law and applies in a range of financial, legal and personal relationships. Fiduciaries must avoid conflicts of interest and act with loyalty and good faith while prioritizing the needs of the beneficiary above their own.

Fiduciaries are commonly responsible for managing assets, making decisions on behalf of someone else or carrying out a legal duty, such as the execution of a will. For example, a financial advisor with fiduciary status must recommend investment options that are best for the client, not simply those that earn them a commission.

Similarly, a trustee managing a trust fund must distribute the assets according to the trust terms and in the interest of the beneficiaries.

Fiduciary roles carry legal consequences. If a fiduciary breaches their duty — by mismanaging funds, acting in self-interest or failing to act — they may be legally liable for damages.

What It Takes to Be a Fiduciary

A father teaching a daughter how to save money with a piggy bank.

So, can any person serve as a fiduciary? In many cases, yes, but the role requires more than just willingness. Fiduciaries must meet certain criteria and uphold a range of standards depending on the nature of their duties.

Legal Capacity and Qualifications

To act as a fiduciary, a person must have the legal capacity to enter into binding agreements. That typically means they must be an adult (18 or older) and of sound mind. For certain roles, like trustees, executors or court-appointed guardians, the person may also need court approval or meet statutory requirements.

Professional credentials may be necessary in some industries, but are not required for all fiduciary roles. One example is a Registered investment advisor (RIA). This party must be licensed and regulated by the SEC or a state authority. They must also act as fiduciaries under federal law.

Duties and Standards

All fiduciaries must adhere to key legal and ethical standards.

Duty of loyalty: Act in the best interest of the beneficiary without self-dealing or conflicts of interest.
Duty of care: Make informed, responsible decisions and manage assets prudently.
Duty of disclosure: Communicate material information transparently and truthfully.
Duty of confidentiality: Protect sensitive information and avoid unauthorized disclosure.

Fiduciaries may be liable for breach of fiduciary duty. This is a serious offense that can result in financial restitution or removal from the role.

Oversight and Enforcement

Some fiduciary roles involve oversight from courts or regulatory agencies.

Court-appointed guardians or conservators must file reports with the court and may have to post a bond.
Trustees may be required to provide annual accountings to beneficiaries.
Financial professionals must comply with state and federal regulations.

Failing to follow these rules can lead to legal challenges, financial penalties or personal liability.

Different Types of Fiduciary Relationships

Fiduciary relationships arise in a range of personal and professional contexts. While each role comes with unique responsibilities, all require acting in someone else’s best interest.

Executor or Personal Representative

An executor, appointed by a will, is responsible for managing a deceased person’s estate. This includes paying debts, distributing assets and filing taxes. Executors have a fiduciary duty to act in the best interest of the estate and its beneficiaries.

For example, a son who is executor in his mother’s will must ensure that her estate is handled according to her wishes and state probate law.

Trustee

A trustee manages assets placed in a trust on behalf of the beneficiaries. They must follow the terms of the trust and ensure a proper distribution of funds.

For example, a family friend acting as trustee of a child’s trust fund must ensure the money is used only for the child’s benefit, according to the trust agreement.

Financial Advisor

Not all financial advisors are fiduciaries, but those registered as investment advisors have the legal requirement to act in their clients’ best interests. Brokers, by contrast, may be held to a lower standard unless they voluntarily adopt fiduciary practices. However, you should note that adopting the fiduciary standard voluntarily does not make it a legal one.

For example, a fiduciary financial advisor must recommend the most beneficial investment for a client’s goals, not the product that earns them the highest fee.

Legal Guardian or Conservator

The court appoints a guardian or conservator to manage the personal or financial affairs of someone unable to do so themselves. They must act in the best interest of the ward and are subject to ongoing court supervision.

For example, a court appoints a niece as guardian of her elderly uncle with dementia, requiring her to make healthcare and financial decisions in his best interest.

Frequently Asked Questions (FAQs)

Can Any Person Serve as a Fiduciary?

In most cases, yes, any adult with legal capacity and no disqualifying factors (such as a criminal record involving financial wrongdoing) can serve as a fiduciary. However, some fiduciary roles require court appointment or professional qualifications.

Do You Have to Be a Financial Professional to Be a Fiduciary?

No. Many fiduciaries — such as executors, trustees and guardians — are family members or close friends, not professionals. Professional fiduciaries like RIAs must comply with industry-specific compliance requirements.

What Are the Risks of Serving as a Fiduciary?

The courts may hold fiduciaries legally and financially responsible for mismanaging funds or breaching their duties. In some cases, a court may order repayment of losses or removal altogether.

Can a Family Member Serve as a Fiduciary?

Yes, family members frequently serve as fiduciaries, especially as executors, trustees or guardians. However, they must still follow legal duties and may face consequences if they fail to act in the best interest of the person or estate they represent.

Bottom Line

A senior couple reviewing their finances.

Any person can often serve as a fiduciary but the role is not without responsibility. Whether acting as an executor, trustee or financial advisor, fiduciaries must meet legal standards and uphold a high level of trust and care. The role involves serious obligations and, in some cases, legal oversight or financial liability.

Financial Planning Tips

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