Understanding the Word “Fiduciary”

I see the word “fiduciary” tossed around a lot these days. New clients sometimes ask if I’m a fiduciary. Yes indeed, as both a financial planner with a wealth management firm and an attorney. It is always good to ask, and the word fiduciary is important. However, you can’t just stop at the word itself.

By definition, a “fiduciary” is a person who holds a legal and/or ethical relationship of trust with one or more other parties. Fiduciaries are legally obligated to put the best interests of another person ahead of their own. A fiduciary obligation is created in many different settings. A trustee of a trust is a fiduciary to the trust beneficiaries. Corporate board members are fiduciaries to the shareholders of a company. Anyone who manages financial assets for the benefit of another person is a fiduciary, with the legal responsibility to look out for the best interests of that person.

But being a fiduciary and having integrity are not one and the same. A person can be in a fiduciary role but breach their fiduciary duty because they lack honesty and integrity. There are a myriad of examples of breach of fiduciary duty. Bernie Madoff, the infamous investment manager who swindled billions from his clients, was a fiduciary who breached his duty.

Some people working in the financial planning/investment industry take careful pains to make sure the word “fiduciary” shows up after their name. They hope that word will enhance their credibility, but credibility and integrity have very little to do with what title comes after a person’s name. As I often tell my clients and prospects when we discuss the term fiduciary, it really comes down to whether the person you are dealing with is at heart an honest and straightforward person. If they aren’t then having the word fiduciary after their name is meaningless.

Don’t stop at the word fiduciary. References and, most importantly, your personal experience with the person and their firm will go a long way to tell you if that person really takes their position as a fiduciary seriously. Start your investigation by looking at little things. Did the person follow-up on their promises? Did they get that piece of information to you, or schedule your follow-up appointment as timely as they said they would? As Albert Einstein said, “Whoever is careless with the truth in small matters cannot be trusted with important matters.”

It’s appropriate for you to ask someone if they are a fiduciary. It’s just as important to go beyond the answer to really explore what kind of person you’re dealing with.

Fun fact: Yes, I know the Lions were not fun to watch last Sunday. But let’s remember that since 2004 five teams lost the first game of the season and went on to win the Super Bowl: New York Giants, Baltimore Ravens, New England Patriots, Los Angeles Rams, and Kansas City Chiefs. Now, let’s see how the next game goes.

Tech Scams to Watch For

This past Tuesday I was in my office just finishing an appointment when a text popped up on my phone indicating that my bitcoin withdrawal had been confirmed and that if I had any questions to click on the link in the text.  Hmmm. I didn’t make any withdrawal request on my bitcoin, so I immediately logged on using my normal method to check my balance and it was safe. A new and dangerous scam just crossed my iPhone. That led me to think about looking up the five most dangerous current tech scams going around. Here they are:

1. Employment scams. These are phony job sites or recruitment ads. Some are intended simply to get your personal information. They can either ask for that information as part of the job application, or sometimes they claim you have been offered a job and need to fill out personal information. Some scams involve giving a bonus for training purposes or supplies. The bonus check bounces but not before they request a payback because there was an overpayment.
2. Crypto currency scams. I started this Up Early with the one that just hit me. Bitcoin values have soared, so the scammers are particularly interested in crypto. These are very sophisticated scams which typically start with slowly building trust with the victim and then offering an investment opportunity with large returns. The victim is asked to invest their crypto and it’s a disaster.
3. Celebrity imposter scams. As ridiculous as it may sound, the most common scam in this way relates to scammers who find emotionally vulnerable victims and make them believe they are in a romantic relationship with a celebrity. The “celebrity” then requests money to start a new charity or for the down payment on a house for both the victim and the celebrity to live in.
4. Tech-support scams. This one hit my family about six months ago. A “new” window pops up and freezes the window you are in and requests you click on a button. It usually has a logo of Microsoft or Apple and a menu to eventually get you to someone who asks to be able to get into your computer to fix things. Some scammers simply try to sell useless software maintenance or warranty programs. Remember, no legitimate pop-up window will ever ask you to click on a link and no legitimate company will ask you for permission to get into your computer remotely.
5. Card-decline scams. This usually happens with an online purchase. The victim tries to make an online purchase and is told the card was declined when in reality the charge went through and so they try a second time and either receive a second charge or a much larger charge than the first one. The best protection here is to use a credit card rather than a debit card because a debit card is an instant withdrawal while the credit card can be monitored and the credit card company can decline the charge.

The technological breakthroughs in the last decade have made our lives easier, but also made scams much more prevalent and dangerous. AI-powered scams, including voice impersonation and video cloning are not far off. You may read one or more of the five scams above and think it will never happen to you. Think again, in a moment of weakness anyone can fall for something that in hindsight seems ridiculous. Also, you may have a loved one who doesn’t think clearly enough and can get scammed in these areas.

We should all take note of the last command that the referee will give to Canelo Alvarez and Terence Crawford right before their epic boxing match next week – “Protect yourself at all times.” (I just cannot wait for that fight!!).

Fun fact: Well, here we are in September. Did you know it’s the only month that has the same number of letters in its name as its numerical order (nine).

 

Credit Card Debt After Death

Credit cards are important tools for daily and monthly expenses. When used correctly, they offer the credit card holder a 30-day interest free loan – you make a purchase on your credit card today, but you don’t have to pay the actual bill until you receive the next month’s statement. I wrote a piece about various creditor issues at death last April, but today I want to focus on what happens to outstanding credit card debt when you die. There are a few important factors to consider:

1. Was there a joint account holder? If so, a careful reading of the credit card agreement likely holds the surviving card holder responsible for the full debt.
2. Was there a probate estate opened? If there is no joint account holder, then the debt becomes the liability of the decedent’s probate estate. If probate is required at death, the appointed Personal Representative will be responsible for addressing all debts, including credit cards. Remember, probate is a court proceeding that can and should be avoided with proper planning.
3. Was probate avoided? Perhaps the decedent had a good estate plan and avoided probate through a combination of a trust and beneficiary designations. Without probate, the credit card company (or the debt collection agency that typically buys the debt) has less leverage to collect on the debt because there is no formal place to file the debt claim. Sometimes the fact that there is no probate results in the debt being dropped. Other times, the trustee of the trust can negotiate the debt down significantly because the only recourse the credit card company has is to open a probate estate on the decedent just to collect the debt—very costly.
4. Are family members on the hook for the debt? Generally, no, unless they co-signed for the debt or are joint owners on the credit card. There is no legal obligation simply because one is a spouse or child of the credit card holder.
5. What should I do if I’m handling the financial affairs of someone who dies with a credit card? Immediately contact the company so that they stop any future purchases that could be fraudulent. Proceed slowly and don’t feel obligated to give too much information. Remember, you might not have a complete financial picture of the decedent for several weeks. If you know that there will be no probate, tell them. If you aren’t sure if there will be a probate estate, let the credit card company know that too. Do not share any details of the decedent’s financials. The credit card company does not have a right to know that unless they actually sue for collection.

Credit cards make life easier. Hopefully, the information above will help to make credit cards easier after the death of the card holder, too.