The following blog article was written for Webb Law Group, APC

A fiduciary duty is an obligation to act in a person’s best interest, due to the nature of the relationship with that person. California law recognizes that there are relationships wherein one party places their trust and confidence in another, and that said relationships need to be regulated to ensure each party acts fairly and honestly.

A fiduciary obligation exists whenever the relationship between two parties involves a special trust, confidence, and reliance on one party (the fiduciary) to exercise discretion or expertise when acting for the other. The fiduciary must knowingly accept these responsibilities to exercise their discretion, and to act on the other party’s behalf.

This type of relationship is generally created only when one party places their full trust in the other. In most cases, no profit should be derived from the relationship unless explicit consent is granted at the time said relationship is established. Unfortunately, relationships of this nature have a tendency to be mishandled or abused. Sometimes, this may also occur due to negligence on the part of the fiduciary.

elderly woman

Why Were Fiduciary Duty Laws Created?

The individual who is considered or has the responsibility of being a fiduciary has a legal responsibility to the second party, also known as the beneficiary. Therefore, that person (or party) has a fiduciary duty to protect and uphold that trust. In other words, said party has a legal obligation to act entirely in the best interest of the other party.

In regards to California law, the fiduciary is given legal responsibility to the beneficiary, and it must be ensured that there is no conflict of interest between the two parties. If those fiduciary duties are breached, the beneficiary or beneficiaries are entitled to various damages and compensations. This can be true even if no harm was done.

Fiduciary duties were created in order to encourage people to take on fiduciary responsibilities. Ultimately, the various laws were enacted to reduce the abuse or exploitation of beneficiaries. In addition, they also offered beneficiaries a greater assurance that agreements and contracts would be honored and protected in court.

Frequently a fiduciary may be managing someone’s finances and investments. As they have been put in a position of full trust by the beneficiary, they have the responsibility to be loyal and provide reasonable care to the assets under their control. No matter the type of fiduciary relationship, it is always expected that the fiduciary act in the best interest of, be truthful to, and be absolutely candid with the beneficiary. If that trust is broken or betrayed, the fiduciary is liable under California law.

disabled person

The Responsibilities of a Fiduciary

All in all, the primary responsibility of a fiduciary is to act in the best legal interest of the beneficiary. While making investments or handling money in their care, they must demonstrate prudence in investment management decisions. Frequently, guidelines will be set up as a default “checks & balances” system for the fiduciary to follow. This is done in order to keep beneficiaries honest and to ensure they act with knowledge, foresight, and in good faith.

As many fiduciaries are tasked with investing for retirement, they must be familiar with the Employees Retirement and Income Security Act. This includes all laws and guidelines within. Once a fiduciary understands their role and the part they will play in the relationship, they must also provide the responsibilities and roles of any other parties involved. In some cases, service agreements may need to be put down in writing and signed by both parties.

Next, the fiduciary should work with the beneficiary (if at all possible) to create a set of goals and objectives for their relationship. In cases of financial spending and investment, both parties should consider the potential for return and the level of risk associated with each investment opportunity. In most cases, the fiduciary should choose to create a written policy which outlines their potential investment strategy for the beneficiary’s funds. As with other parts of the relationship, this requires due diligence on the part of the fiduciary.

Finally, and most importantly, a fiduciary may be liable under California law if n can be proven. They may also be held responsible if they ignore their responsibilities or abuse the trust of the beneficiary. To keep things on the level, the beneficiary must monitor investments and performance reports on a regular basis. If investments are not producing results, or funds are being lost, it should be decided whether or not said investments should be maintained or disposed of.

elderly mother and son

Are You In Need Of Legal Advice?

If you’re a beneficiary in California and you feel your designated fiduciary violated your trust or exploited your relationship, contact the professional team of lawyers at Webb Law Group, APC. Our team of attorneys can answer your questions about fiduciary law and let you know if you may have a case or are entitled to compensation.

Having a reputable attorney by your side for matters of this nature will offer you the best possible chance of navigating the legal process and informing you of your rights. If you feel that you need legal representation, we are happy to review your legal needs and provide consultation and support where necessary. For questions, or to schedule a consultation, contact Webb Law Group today at 559-431-4888 (Fresno) or 619-399-7700 (San Diego).

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