Bay Area Estate And Tax Planning Law Firm

Understanding the concept of fiduciary duty in California

On Behalf of | Oct 5, 2022 | Blog, Fiduciaries |

Fiduciary duty refers to the duty of one party to act in the best interests of another. The main fiduciary duty is the duty of care, which requires fiduciaries to exercise reasonable care and skill when making decisions on behalf of others. There are other fiduciary duties, including the duty of loyalty and the duty of disclosure. This concept applies in many different contexts.

When a company’s directors make decisions on behalf of shareholders

This is known as the duty of care. One example of this is when a board of directors approves a new product. The duty of care requires the directors to make sure that the product is safe and does not have any harmful side effects. Additionally, the directors must also ensure that the product is effective and will not cause any financial losses for the shareholders.

When a trustee manages a trust

The trustee has a fiduciary duty to the beneficiaries of the trust. This means that the trustee must make decisions in the best interests of the beneficiaries. For example, if the trust is for a child’s education, then the trustee must make sure that the money is used for that purpose. It would be a breach of fiduciary duty if the trustee used the money for something else, such as his own personal expenses.

When an agent represents a client

The agent has a fiduciary duty to the client, meaning that they must act in the best interests of the client. For example, if the client is buying a house, then the agent must make sure that the house is in good condition and is worth the price that the client is paying.

Fiduciary duty is an important concept because it ensures that people who are entrusted with making decisions on behalf of others do so in a responsible manner. This helps to protect the rights of those who may be affected by the decisions.