It sounds financial but it isn’t. It is all about the person’s behavior in the relationship.
A fiduciary relationship is a legal relationship that includes responsibilities that can be enforced and it is important to look closely at it, according to the Denton Record-Chronicle in “What is the “F” word?”
In a fiduciary relationship, whether between a lawyer and a client, a CPA and a client or two non-professionals, one person has a duty to act only in ways that will benefit the other person or group of people. The fiduciary is required to be loyal, act in good faith, be completely honest and refrain from doing anything that would benefit the fiduciary, instead of the person they are responsible for. This is required, even if the people are not aware of being in a fiduciary relationship.
The fiduciary may not use their position, as trustee or financial advisor or executor, to “self-deal,” or take actions that benefit the fiduciary and not the other person or people. The fiduciary must also share all relevant information with the beneficiary.
So, who are these fiduciaries? They could be business partners, someone who has power of attorney for another person, trustees or estate representatives, attorneys or employees. These formal relationships are created by a relationship; in these instances, they are usually around legal agreements in the shape of partnership agreements, estate planning documents, retainers (for attorneys) and employment contracts for employees.
Some fiduciary relationships come with more responsibilities than others. Trustees and personal estate representatives, like executors, are charged with tasks in addition to general fiduciary duties. They are usually given the responsibilities of handling money, property and investments. They have a duty to properly manage those assets and report on those assets to the beneficiaries and heirs.
For attorneys, client-attorney privilege, that is, not sharing information that the client tells the attorney in confidence, is a fiduciary duty. It is also an ethical duty for the attorney.
For employees, the duty to act in an employer’s best interest may not be as limiting. Unless there is a non-compete contract, the employee may seek employment from a competitor or create a competing business while working for the employer. However, the employee may not steal customers or other employees, before resigning from a position.
If a fiduciary does not follow through on their duties, it is called a breach of fiduciary duties. In estate planning, the executor is expected not to self-deal, and to put the interest of the estate and its beneficiaries first. The executor may charge a fee. However, the amount is determined by the laws of the state.
Reference: Denton Record-Chronicle (Jan. 16, 2019) “What is the “F” word?”