A fiduciary is an individual or company entrusted to manage the assets of another individual or company (a beneficiary). A fiduciary, also known as a trustee, has legal authority to handle financial matters of the person or company for whom they work. Fiduciary duties are the obligations the fiduciary has with regard to the beneficiary. Most of these duties fall under the two main categories of loyalty and care.
In most fiduciary relationships, even though the fiduciary has legal authority to work with the beneficiary's assets, the fiduciary still has to complete work based on what the beneficiary wants. They have a duty not to abuse the authority the beneficiary allows to them and to work in the best interests of the beneficiary. Notedly, this isn't always easy, as there may be multiple beneficiaries on an account who have different desires and views on how funds ought to be managed. Even though it isn't always possible to make all beneficiaries happy, a fiduciary must never the assets for his personal gain.
Competence and Skill
Fiduciaries are supposed to perform all of their work with a level of competence and skill that meets the professional expectations of the beneficiary and fiduciary law. This means that the fiduciary has the duty to find out information that may be relevant, analyze situations logically, employ all applicable abilities in their fiduciary tasks and to verify their work for accuracy. Fiduciaries who do not complete work according to a satisfactory level of competency and skill may be found guilty of a breach of fiduciary duty and can be held legally responsible for the consequences of their improper work, according to legal.practitioner.com.
Fiduciaries are trustees, which means that they are supposed to protect beneficiaries' assets against improper use and seizure. A fiduciary thus has the duty of keeping accurate records related to the beneficiary's account and alerting the beneficiary of any unauthorized or unexpected activity or proceedings related to the funds, according to enotes.com.
Fiduciaries operate under fiduciary or trust agreements, which specify what the beneficiary expects the fiduciary to do with the assets. Fiduciaries should follow these guidelines in order to prevent conflicts of duty and conflicts of interest, and to ensure that they are meeting all the requirements of the beneficiary. Following the guidelines becomes extremely important when the guidelines detail the order of precedence of multiple beneficiaries.
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