What is the Fiduciary Duty?
Here begins a three-part series of articles defining and describing the duties that must be performed by trustees, conservators, personal representatives and others who serve in a fiduciary role.
It is first necessary to define the word, “fiduciary”. A person who is a fiduciary is one who has been given the confidence of another person, sometimes called a “grantor”, to handle such person’s money or property. The fiduciary relationship can occur privately, as it does where a trust is established by agreement between an individual and a trustee. It can also occur in the context of a court proceeding, in which a court selects either an individual or a corporation to be responsible for the property of another person. The appointment of fiduciaries frequently happens in the probate courts when they appoint conservators or personal representatives or trustees to be responsible for management of the estate of a disabled or deceased owner of property. For purposes of these articles, we’ll focus on the duties of trustees. Other kinds of fiduciaries are charged with similar duties.
Regardless of how the fiduciary relationship is established, it always gives rise to the fiduciary duty, the standard of conduct that applies to fiduciary relationships. The fiduciary relationship is a characterized by faith and trust in the conduct of the fiduciary toward the individuals who will receive the benefit of the property that is being managed by the fiduciary. The law requires fiduciaries to adhere to the highest standard of conduct in their handling of others’ property.
The fiduciary duty consists of two major parts. First, there is the duty of loyalty to the individuals for whom property is being managed. Such individuals may be the original owner of the property, the beneficiaries, or both. Secondly, there is a required duty of care over the property that has been entrusted to the fiduciary. In the next article on this topic, we will examine the duty of loyalty and the demands it places on fiduciaries. A later article will focus on the duty of care and the specific responsibilities that fiduciaries are legally required to perform.
If you have questions about any aspect of the fiduciary’s role, please contact the members of our Trusts and Estates Department.