What Does Fiduciary Mean?

What Does Fiduciary Mean?

August 11, 2023

By Melinda Gustafson Gervasi

Without fail, when explaining a Wisconsin Power of Attorney for Finances document to a client, I point out the last page.  It requires the signature of the primary and secondary agents appointed by the principal.  In simple terms, the first and second person my client appointed to handle their financial matters if they were alive but too sick to act, needs to sign-off of being a fiduciary.  "What exactly is a fiduciary?" many clients ask.

According to Dictionary.com, a fiduciary is a person to whom property or power is entrusted for the benefit of another.  Building on that basis, the Consumer Financial Protection Bureau states that a Fiduciary is someone who manages money or property for someone else.  A key concept is that they are managing the money for someone; it is not their own money.  How is this implemented you might wonder.  Keep the following in mind if you have been asked to be a fiduciary:

1. Keep Records -- note any and all monies you collected (paycheck, disability insurance, settlement from a personal injury case, tax refund, etc) as well as details on all money you spend (mortgage or rent, medical bills, utility payments, insurance premiums, tax liabilities, etc).  If it were me, I would track everything to the penny and have documentation for each transaction.
2. Separation of Funds -- this is NOT the money or property of the fiduciary, they are simply managing another person's assets.  Do not comingle funds with your own. 
3. Proceed With Caution -- double and triple check bills you pay and forms you complete.  If you are acting as a Financial Power of Attorney it means someone has had a health crisis and cannot act.  The last thing a person with a health crisis needs is a financial crisis.  Do not be afraid to retain professional help, such as a CPA or financial planner.
4. Act in the Best Interest -- it is key that you act in the best interest of the person who is sick.  What serves them the best, not what serves your needs.

When talking with my clients about who to name as a Power of Attorney for Finance I quip "you need a person who is going to be wise, not someone who will take your money to Vegas and put it all on red".

Image by M. Gustafson Gervasi, 2023

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