What is a Fiduciary?

You often come across the terms ‘fiduciary’ and ‘fiduciary duties’ in the course of estate planning – but do you know exactly what these terms mean?

Fiduciary

A fiduciary is an individual, a business or even an association that holds assets or power for another party with the legal authority and duty to make decisions regarding finances and matters on their behalf. A fiduciary is expected to act with good faith and honesty and is normally chosen with the premise that they have more knowledge and expertise about the particular matters being handled. Typical fiduciaries that are encountered are:

• Attorneys;
• Financial advisors;
• Real estate agents;
• Bankers;
• Stockbrokers;
• Estate executors; and
• Guardians.

A fiduciary is always expected to act in the best interest of the person to whom they are providing services or care.

Fiduciary Duties

A fiduciary duty is an obligation to act in the best interest of another party, and as such, a fiduciary is held to a higher standard of both trust and conduct than a ‘regular’ person. While it seems that a fiduciary relationship is based primarily on trust between the two parties, there is also a legal obligation involved when a relationship involves trust, confidence and reliance on the fiduciaries’ expertise. In fact, in a fiduciary relationship, laws forbid the fiduciary from acting in any adverse or contrary manner to the interests of the client, or from acting for their own benefit.

Certain relationships in the estate planning process are regarded as fiduciary, these include:

• Attorney and client;
• Trustee and beneficiary;
• Executors and the heirs or beneficiaries of a decedent’s estate; and
• Conservators and the protected person.

The term fiduciary comes from the Latin term ‘fiducia’, which means trust. Fiduciary duties not only involve trust, but they are taken further to an obligation that is taken very seriously not only by estate planning attorneys, but by many in the legal, business and financial sectors.