Have you ever heard the term “breach of fiduciary duty” and wondered what it means? Don’t worry; it is not as complicated as it sounds and it can be explained in simple terms.
Fiduciaries, duties and beneficiaries
A fiduciary has a special duty to act in the best interests of another person or entity. This could be a trustee, executor, financial advisor or anyone responsible for handling someone else’s money or property.
The beneficiary is the person who entrusts their money or property to the fiduciary. The relationship between the fiduciary and the beneficiary is a legal relationship.
Breach of fiduciary duty
A breach of fiduciary duty happens when the fiduciary fails to fulfill their responsibilities and does something that goes against the beneficiary’s best interests. In other words, they break the trust placed in them.
Examples of a breach of fiduciary duty can include:
- Self-dealing
- Mismanagement of funds
- Conflict of interest
When a breach of fiduciary duty occurs, the beneficiary has the right to take legal action against the fiduciary to seek compensation for any harm or losses they have suffered. The court may require the fiduciary to repay the beneficiary for any financial losses and impose additional penalties.
Protecting yourself
To protect yourself from a breach of fiduciary duty, choose your fiduciaries carefully. Do your research. Ask for references, and make sure they have a good track record.
If you suspect someone is not acting in your best interests, consulting with an attorney who understands your rights and responsibilities may be the way to go.
A breach of fiduciary duty can lead to severe consequences for both the fiduciary and the beneficiary, so choose your fiduciaries carefully and remain on top of your financial matters as much as possible.