Breach of Fiduciary Duty: How to Recover

When someone accepts legal or ethical responsibility for another party by the means of a promised service, they can become a fiduciary for said party. A fiduciary is “a person or a business like an attorney, trustee, bank or stock brokerage who has the power and obligation to act for another under circumstances which require total trust, good faith and honesty,” (Law.com). A fiduciary must act in YOUR best interest at all times. When a fiduciary fails to deliver, or abuses the trust of their beneficiary, a breach of fiduciary is constituted.

Examples of fiduciary relationships

  • Trustee/Beneficiary
    • Estate arrangements and implemented trusts. The trustee serves as the fiduciary for the beneficiary. This relationship is one of the most important aspects of estate planning.
  • Guardian/Ward
    • Legal guardianship of a minor is transferred to an appointed adult. The guardian serves as the fiduciary for the minor (beneficiary). The guardian must fulfil the duty of ensuring said minor receives appropriate care, which includes responsibilities such as choosing schools, medical care and discipline.
  • Agent/Beneficiary
    • An agent is legally appointed to act on behalf of the beneficiary without a conflict of interest. For example, investors (beneficiaries) selecting investment fund managers (agents) to manage their assets.
  • Attorney/Client
    • The U.S. Supreme Court classifies the relationship between attorneys and their clients as one of the strictest, requiring the highest level of trust and confidence.
  • Corporate fiduciaries/officers
    • Corporate fiduciaries are parties that are entrusted with managing financial assets for a beneficiary, such as banks and trust companies. Corporate officers also fall into this category as they are individuals appointed by a board of directors to manage the day-to-day operations of a company.

Examples of fiduciary breaches

Recognizing a breach of fiduciary duty lies in the hands of you, the beneficiary. Similar to a breach of contract, it is crucial that you fully comprehend the scope of services to be provided by the prospective fiduciary before enlisting their services or entering into an agreement. Common breaches of fiduciary include negligence, such as a guardian ignoring their responsibility in ensuring the ward receives education; tardiness on deliverables; and failure to disclose information necessary for the principal of a business to make an informed decision.

How to recover

As with any legal issue, if you believe a fiduciary has committed a breach, the best option is to contact a lawyer. A lawyer with experience in business can easily protect your rights and help you obtain the promised services, as well as advise you regarding the best way to move forward.

Fiduciaries are entrusted to maintain the highest level of ethical standards and to deliver on every service requested by a beneficiary. Fiduciary duty exists in almost all business relationships, making it extremely important that both fiduciaries and beneficiaries understand the ins and outs of the promised services. A breach of fiduciary duty can be devastating. Luckily, a good lawyer can clean up the mess.

 

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