What is a Fiduciary Relation and Why Does It Matter?
A fiduciary relation is a legal or ethical relationship of trust between two or more parties. Typically, a fiduciary relation involves a person or entity (the fiduciary) who has a duty to act in the best interest of another person or entity (the beneficiary).
Fiduciary relations can arise in various contexts, such as business, finance, law, medicine, education, and family. Some examples of fiduciary relations are:
- A lawyer and a client
- A trustee and a beneficiary
- A financial advisor and an investor
- A doctor and a patient
- A teacher and a student
- A parent and a child
The fiduciary relation imposes certain obligations on the fiduciary, such as loyalty, honesty, confidentiality, diligence, and care. The fiduciary must avoid any conflicts of interest or self-dealing that could harm the beneficiary. The fiduciary must also disclose any relevant information or risks to the beneficiary.
The fiduciary relation matters because it protects the beneficiary from exploitation, fraud, negligence, or abuse by the fiduciary. It also ensures that the fiduciary acts in accordance with the beneficiary’s wishes, goals, and interests. The fiduciary relation can enhance the quality and efficiency of the services or transactions provided by the fiduciary.
If the fiduciary breaches the fiduciary relation, the beneficiary may have legal remedies to recover damages or seek other relief. The fiduciary may also face disciplinary actions or criminal charges for violating the fiduciary relation.
To learn more about fiduciary relations and how they apply to your situation, contact a qualified professional in your area.
Examples of Fiduciary Relations
Fiduciary relations can occur in various domains and scenarios. Here are some common examples of fiduciary relations and the duties involved:
Broker and Principal
A broker is a person or entity that acts as an intermediary between a buyer and a seller in a transaction. A principal is the person or entity that hires the broker to represent their interests in the transaction. The broker has a fiduciary duty to act in the best interest of the principal and to disclose any material facts or risks that may affect the transaction. The broker must also avoid any conflicts of interest or commissions that may compromise their loyalty to the principal.
Trustee and Beneficiary
A trustee is a person or entity that holds and manages property or assets for the benefit of another person or entity, called the beneficiary. The trustee has a fiduciary duty to administer the trust according to the terms and purposes established by the creator of the trust, called the settlor. The trustee must also act prudently and impartially in investing and distributing the trust assets, and to keep accurate records and accounts of the trust activities.
Attorney and Client
An attorney is a person who is licensed to practice law and to provide legal advice and representation to clients. A client is a person or entity that hires an attorney to handle their legal matters. The attorney has a fiduciary duty to act competently, diligently, and zealously in pursuing the client’s objectives and interests. The attorney must also maintain confidentiality and privilege of the client’s information and communications, and to avoid any conflicts of interest or unethical conduct that may harm the client.
Real Estate Agent and Buyer or Seller
A real estate agent is a person who is licensed to facilitate the sale, purchase, or lease of real property. A buyer or seller is a person or entity that engages a real estate agent to assist them in finding or selling a property. The real estate agent has a fiduciary duty to act honestly, fairly, and professionally in serving the buyer or seller. The real estate agent must also disclose any relevant information or defects about the property, negotiate on behalf of the buyer or seller, and protect their confidential information.