A fiduciary relationship exists when one person in a relationship has a legal obligation associated with the management of another person’s assets or money. An accountant, for example, has a fiduciary responsibility to his or her clients. The law expects that an accountant will not purposely make poor decisions regarding a client’s assets and will work with due diligence and professional skill to protect or grow those assets as desired by the client.
If you are involved in a person’s estate, then you might be involved in a fiduciary relationship. If you have been asked to be the executor of a person’s will, then you have a fiduciary responsibility to the estate. While genuinely innocent mistakes do happen, the law expects you to make an honest attempt to use the resources at your disposal to handle the estate. That means following the estate plan and will to distribute assets as the decedent desired.
Another time you might be in a fiduciary relationship is if you are the power of attorney for someone else. You have a legal obligation to make decisions about that person’s money and assets that are good for that person, not decisions that are good for you or someone else. The same is true if you are made a trustee of a trust. For example, if someone dies with minor children and you are the trustee, then you must work within the bounds of the trust and make decisions that benefit the children.
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Working with a legal professional can help you understand your fiduciary duties. A lawyer also helps you ensure you don’t make decisions that could put your actions outside of legality.
Source: Investopedia, “Fiduciary,” accessed May 12, 2016
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