What Is A Fiduciary?
Essentially, a fiduciary is a person or organization that owes to another the duties of good faith and trust. The highest legal duty of one party to another, it also involves being bound ethically to act in the other’s best interests. A fiduciary might be responsible for general well-being, but often it involves finances – managing the assets of another person, or of a group of people, for example. Money managers, bankers, accountants, executors, board members and corporate officers can all be considered fiduciaries.
What Does A Fiduciary Do?
A fiduciary’s responsibilities or duties are both ethical and legal. When a party knowingly accepts a fiduciary duty on behalf of another party, he or she is required to act in the best interests of the principal, the party whose assets they are managing. The fiduciary is expected to manage the assets for the benefit of the other person rather than for his or her own profit, and cannot benefit personally from their management of assets. This is what is known as a prudent person standard of care, a standard that originally stems from an 1830 court ruling. This formulation of the prudent-person rule requires that a person acting as fiduciary is required to act first and foremost with the needs of beneficiaries in mind.