Fiduciary duty is essentially defined as a high standard of care. The person with a fiduciary duty is known as the fiduciary, while the person to whom the duty is owed is called the principal or the beneficiary. A fiduciary relationship is established on the ideas of faith and confidence. A fiduciary must be loyal and reasonably care for the assets within their custody.
The fiduciary's actions should always be performed with the advantage of the beneficiary in mind. A person who breaches their fiduciary duties must account for any ill-gotten profit and can possibly be sued for damages by the beneficiary.
Although courts have not fully defined the particular criteria of fiduciary relationships, certain relationships are universally regarded as fiduciary. Examples of this include: attorney and client, broker and principal, principal and agent, trustee and beneficiary, and executors or administrators and the heirs of a decedent's estate.
Fiduciary relationships cover cases in which one side places confidence in the other. This forces dependence by one individual and strengthens the influence if the other. It is important to note that family relation does not automatically establish a fiduciary relationship. Fiduciary relationships do not necessarily arise between parents and their children.
Courts typically examine transactions between people involved in fiduciary relationships very closely. Scrutiny is placed on transactions that involve a dominant individual obtaining advantage or profit at the expense of the party under their influence.
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