A fiduciary is a person who acts in the best interests of others, performing a duty of trust and good faith. Fiduciaries are legally and ethically bound to put their clients’ best interests ahead of their own.
Their duties may be to provide for others’ well-being and safety, such as a child’s legal guardian. However, the job often revolves around managing money or other assets of another person or group of people.
Understanding a fiduciary relationship
Two parties make up fiduciary partnerships – the beneficiary and the trustee. Fiduciaries include:
- Estate executors or personal representatives
- Investment advisors, brokers and bankers in trust departments
- Certified public accountants
- Physicians and other healthcare advisers
- A person with power of attorney to manage someone’s assets or care
- A board of directors
How does the relationship work?
A fiduciary agreement is typically spelled out in writing, explaining the relationship between the two parties and the fiduciary’s responsibilities. These agreements include a will or trust, an investment agreement or a policy manual for a board of directors for a nonprofit or nongovernmental organization. Fiduciaries must avoid all conflicts of interest and cannot do anything that can be seen as a breach of the beneficiary’s trust, such as:
- Self-dealing, where the fiduciary benefits at the expense of the client or beneficiary
- Misappropriation of funds
- Negligence or incompetence managing funds
- Disloyalty to beneficiaries
- Colluding with and favoring certain beneficiaries over others
- Co-mingling trust funds with outside monies
Compensation for a fiduciary is typically outlined in the agreement. A board of directors may not be paid but can still receive a nonmonetary benefit as a result of the relationship.
Take action when trust is breached
Kentucky recognizes a wide variety of fiduciary relationships. People who manage or control another person’s money or assets are held to high standards and can face serious consequences when they violate that trust.
If an incompetent or unscrupulous fiduciary harms you, an experienced attorney can help you take action by proving the relationship existed, the fiduciary breached their duty, the breach caused you harm, and that you have the right to pursue damages.