What is a Fiduciary?
A fiduciary is a person who has been entrusted with great confidence to manage and maintain the financial affairs of another party or parties. A fiduciary could be appointed through a Power of Attorney or a Will as a personal representative. However, attorneys, financial institutions, corporate officers, and other such entities who are trusted to protect the money or other assets of another are also considered fiduciaries. As such, the fiduciary is not necessarily of blood relation, and likewise, a fiduciary relationship is not inherently established between family members – even immediate family. In some cases, the question of whether a party is truly a “fiduciary” can be in dispute.
There is a fiduciary relationship when special confidence is reposed in one who in equity and good conscience is bound to act in good faith and with due regard for the interests of the one reposing the confidence. Incident to the relationship, the fiduciary must tell his principal about anything which might affect the principal’s decision whether or how to act. Allen Realty Corp. v. Holbert, 227 Va. 441, 318 S.E.2d 592 (1984)
What are the duties of a fiduciary?
A fiduciary is trusted to always act in good faith with a commitment to manage and protect the finances and property of the party represented. The fiduciary is held to a high standard of conduct necessitating a diligent sense of propriety. While a fiduciary is allowed to enter into a business transaction with the party they represent, the fiduciary must consider the represented party’s interests first and foremost to avoid “self-interest” conflicts. For example, a stock broker is considered a fiduciary while buying and selling client shares; therefore, the broker should not consider his commission when determining trade options. A family member fiduciary must also consider the highest good of the person they represent before the interests of self or other family members. For example, let’s say Uncle John represents Grandma’s interests through a power of attorney, and his son, John, Jr., owns a company that has never been profitable. When John, Jr. approaches him with a proposal for Grandma to invest in his company, John must consider Grandma’s best interests before those of his son despite personal consequences. The lines of propriety can be blurry in some situations, and it is the fiduciary’s responsibility to maintain detailed records with receipts.
What can you do if a fiduciary is not living up to well established standards?
If you see a situation where a fiduciary is acting in a negligent or even self-serving way, there are legal options to help remedy the situation. In fact, your best course of action to prevent further misconduct may be fiduciary litigation. Holding a fiduciary responsible for his/her actions can be intimidating because there is such a wide range of fiduciary roles and duties. An experienced litigation attorney is essential to quickly and efficiently intervene.