Keep Your Family’s Future Secure

Understanding fiduciary duty

On Behalf of | Apr 26, 2024 | Trust And Probate Administration

Fiduciary duty describes the expectations of the individual who is acting in the benefit of another.  The acting individual, or fiduciary, has the authority to act on behalf of another person or entity. They have the legal and ethical obligation to act in that party’s best interests, always putting theirs above the fiduciary’s own. The fiduciary must act diligently to protect those interests.

Types of fiduciary duty

Fiduciary duty is more than just a single duty.

  • Duty of loyalty. The fiduciary should act in the best interests of the beneficiary. The law expects the fiduciary to take into consideration all the factors and available options of a situation and make an informed decision on behalf of the beneficiary.
  • Duty of care. This duty guides the fiduciary to make sound, sensible decisions for the beneficiary’s well-being. There should be no omissions that could harm the beneficiary.

Examples of fiduciary relationships

The most common examples of fiduciary relationships include that between a trustee and a beneficiary, a guardian and their ward, an agent and a principal, an attorney and the client, a controlling stockholder and the company, or even a financial advisor and their client.

In all these relationships, one party acts, performs tasks, and makes decisions on behalf of another, with the expectation that all decisions and actions will benefit the beneficiary.

Common breaches of fiduciary duty

Examples of breaches can include giving the heirs or beneficiaries of a will insufficient or false information or doing something that is not in their best interests. It can also happen when the fiduciary acts or makes decisions for their personal benefit, instead of advancing the heirs or beneficiaries benefit or gain.

Fiduciary means held in trust. When you choose a fiduciary you want to find someone that will make a legal commitment to the beneficiary.