A fiduciary is an entity or individual that puts a client’s best interests ahead of their own. Fiduciaries often manage money or assets for people or groups and are legally bound to act in good faith while preserving trust.
Fiduciaries operate under a 19th-century term known as a “prudent person standard of care.” They are bound by strict legal and ethical requirements and can be held accountable when they breach that trust and act in their own or another party’s best interests instead of their client.
Examples of fiduciary relationships
Common business relationships involving fiduciary duties include:
- Estate executors and beneficiaries (heirs)
- Lawyers and clients
- Trustees and beneficiaries
- Investment companies and investors
- Insurance agents and policyholders
- Corporate board members and shareholders
In estate administration, the executor has the legal standing to manage a decedent’s property or assets and debt as they see fit on behalf of the estate.
Circumstances that warrant filing a claim
Examples of breach of fiduciary duty include the following actions by trustees and executors:
- Embezzling estate funds
- Failing to comply with contractual obligations
- Commingling estate funds with personal funds
- Causing harm through wrongful omission
- Causing damages through a wrongful act
- Acquiring funds through deceit, undue influence or fraud
Elements of a fiduciary breach claim
When a breach of fiduciary duty occurs, plaintiffs are tasked with proving four components:
- The fiduciary had a legal agreement and obligation to act in the best interests of the plaintiff
- The fiduciary violated that agreement
- The plaintiff suffered harm as a result of the violation
- The plaintiff must prove the breach of fiduciary duty caused the damages
Consequences for fiduciaries who violate these standards can range from damaged reputations to losing a professional license, receiving substantial fines and other penalties. If you are harmed during a fiduciary relationship, it’s advisable to consult with an experienced civil litigation attorney.