What Is a Fiduciary Bank Account?
A fiduciary bank account is a checking or savings account in which the funds are owned by an individual or group and managed by another individual or group for the benefit of the owner, according to the U.S. Department of Veterans Affairs. Fiduciary accounts assume that the party managing the account will look out for the best interests of the fund owners.
The word fiduciary, used as a modifier, means relating to or involving trust. One of the most common types of fiduciary accounts is a trust fund, in which the fund owner sets aside a certain amount of assets for a beneficiary and appoints a trustee or fiduciary to manage the account and control the disbursement of funds. According to CNN Money, common reasons for establishing such an account include: maximizing estate-tax exemptions, providing for a surviving spouse, while making sure there are funds left for other heirs, and also stipulating the inheritance of funds if certain conditions are met.
It is crucial to designate a trustee, or fiduciary, who can be responsible and has adequate financial expertise and knowledge to manage the fiduciary bank account. Other responsibilities of the fiduciary include: ensuring funds to the beneficiary are disbursed as dictated, making sure the beneficiary’s just debts are paid and managing the account to the best of his or her financial ability.