Fiduciary derives from a Latin word meaning "trust." This word plays an important role in the duties of a trustee. The modern concepts of a trustee and fiduciary are interchangeable and often describe aspects of a trustee's legal relationship with an estate's beneficiary. In acting on behalf of a beneficiary, a fiduciary trustee is occupying a position of trust.
General Duties of a Fiduciary
Fiduciary duty means that a person has a responsibility to act in a way that benefits another person. The general duties of a fiduciary are:
Duty of Care
Duty of care means that the fiduciary is required to use due diligence to consider all available options before making decisions that will impact the beneficiary. The fiduciary should take "reasonable prudence" when making decisions, using critical thinking and consulting independent experts as required.
Duty of Good Faith
The Duty of Good Faith means the fiduciary acts in the beneficiary's best interests. The fiduciary must disclose any conflicts of interest.
Duty of Loyalty
Under the duty of loyalty, fiduciary works for the beneficiary and their interests. The fiduciary should not be receiving any personal gain for their work on the beneficiary's behalf.
A trustee is an individual or a company named by another to manage property or assets held in trust. This is an arrangement in which the trustee holds the property or assets of another on behalf of a designated third party, usually referred to as the beneficiary. A trustee has an obligation to manage the assets or property contained in the trust without regard for personal gain. The trustee is a fiduciary of the trust beneficiary and must conduct business affairs on behalf of the trust with the highest ethical standards.
Duties of Fiduciary Trustee
Being a fiduciary to a trust beneficiary legally binds the trustee to act in the beneficiary's best interests when managing the assets contained in the trust. The trustee must remain open with the beneficiary about the status of assets held in trust, including the balance of all accounts and the current fair market values of assets. This level of openness is a requirement of the position because the beneficiary basically owns the property held in trust, but does not gain access to the property until a specified time, usually upon reaching a predetermined age.
Trustee Knowledge Requirements
A trustee operating as a fiduciary to a beneficiary usually has specific knowledge of the law, finance, or real estate to effectively manage the assets or property held in trust until the beneficiary takes full possession. The trustee has an obligation to use this knowledge to defend the property and assets held in trust so the beneficiary can enjoy the full value of the estate upon the formal transfer of property. A beneficiary might not know how to manage the assets contained in the trust, so the trustee's position is one of both great power and responsibility.
Business Transaction Rules
A trustee and the estate's beneficiary might join to purchase property using finances held in trust. The trustee, acting in a fiduciary capacity, must still act in the best interest of the estate, and the beneficiary and should not enter into any purchase agreements that could hurt the long-term viability of trust accounts. The trustee has the power to pull out of any agreement that has a greater potential to harm the trust regardless of the beneficiary's wishes to pursue a deal.