What is fiduciary duty?
Fiduciary Duty is the legal obligation to act in the best interest of another.
The law forbids the fiduciary from acting in any manner harmful to the interests of the client, who is entitled to the best efforts of the fiduciary, and the fiduciary must exercise all the care and diligence at his disposal when acting on behalf of the client.
- Lawyer and Client
- Guardian and Ward
- Director and Shareholders
- Trustee and Beneficiary
- Principal and Agent
Terms to know
Fiduciary—the individual who is entrusted with care over another person’s money or property
Principal—individuals to whom the fiduciary owes a duty and loyalty
Breach of fiduciary duty
Breach of fiduciary duty is when a fiduciary fails to carry out his responsibilities and obligations. In most cases, a third party will handle the principal’s claim of the breach of trust to make sure that it is handled properly. The fiduciary may also be removed from the position and ordered to pay fines or other forms of compensation to the principal.
Even if a fiduciary claims that he was unaware of his responsibilities, he will still be accused of breach of fiduciary duty if he fails to fulfill his obligations.
Calculator: How much will you have at retirement?
Failing to keep detailed accounts/records for the estate can be considered a breach of fiduciary duty.