What are Fiduciary Duties?
Fiduciary duties or responsibilities refer to the obligation of one party, known as the fiduciary, to act entirely on another party’s behalf and best interest. In other words, fiduciary duties outline the relationship between a fiduciary and the principal or beneficiary on whose behalf the fiduciary acts. The fiduciary assumes the legal responsibility to act within the duty of care and in loyalty and good faith on behalf of the other party. In order for a fiduciary to perform their duties effectively, serious measures should be taken to avoid conflicts of interest.
Key Takeaways
- Fiduciary duties are defined as the obligations of a party, referred to as the fiduciary, to act on another party’s behalf and best interest.
- Client-attorney relationships are common examples of fiduciary relationships.
- A fiduciary failing to act responsibly in the best interest of the other party is considered a breach of fiduciary duties
Types of Fiduciary Relationships
A fiduciary's duties differ based on the type of relationship he or she has with the beneficiary. Many different types of fiduciary relationships exist in the United States, including relationships between:
- Attorney and Client: Attorneys have a number of fiduciary duties that must be fulfilled by law. According to the United States Supreme Court, attorneys must act with fairness, loyalty, and care and within the law while acting on behalf of a client.
- Guardian and Ward: Adults may be assigned legal guardianship of a minor child. In these cases, the guardian acts as a fiduciary entity and must act in the best interests of the child.
- Agent and Principle: In business law, an individual, corporation, or government agency may serve as an agent with fiduciary duties. For instance, there is a strong fiduciary relationship between the business executives or directors of a company and its shareholders. The executives are required to make decisions based on the best interests of the shareholders.
- Controlling Stockholder and Company: When a stockholder holds the majority of interest in a certain corporation, he or she may have fiduciary duties towards the company and its actions.
Types of Fiduciary Duties
A fiduciary's duties can vary based on the type of fiduciary involved and the party it represents. Nevertheless, let’s take a closer look at some of the main types of fiduciary duties.
- Duty of Care: When actions are taken on behalf of another party, the fiduciary must act with care. This includes the thoughtful consideration of important decisions and extensive examination of relevant information.
- Duty of Good Faith: Fiduciaries must operate under the principle of good faith. As a result, the fiduciary must act in a manner that reveals that they are genuinely concerned about the other party's best interests.
- Duty of Loyalty: A fiduciary's main priority should be to protect the beneficiary's rights and interests. According to this principle, the fiduciary must properly manage conflicts of interest and avoid activities that put their relationship with the beneficiary at risk.
Bottom Line
Are you under the assumption that someone has failed to uphold his or her fiduciary duties towards you? Have been accused of breaching fiduciary duties? Whatever the issue you’re facing, our excellent lawyers are here to guide you through every step of the way. Get in touch with an Attorney At Law today.
