Fiduciary Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Fiduciary, written in plain English, along with examples of how it is used.

What is Fiduciary?

1\) n. Latin meaning “trust.” Refers to a business or person who may act for another with total trust, good faith, and honesty who has the complete confidence and trust of that person. A fiduciary may include a trustee of a trust, a business adviser, attorney, guardian, estate administrator, real estate agent, banker, stockbroker, or title company. The fiduciary has more knowledge and expertise about the matters being handled and is held to a higher standard of conduct and trust than a stranger or a casual businessperson. Conflicts of interest must be avoided where the fiduciary’s interests are not in the best interest of the person who trusts him/her/it. For example: a stockbroker must consider the best investment for the client and not buy or sell on the basis of what brings him/her the highest commission. The best beneficiary’s best interest should be primary even if a fiduciary and beneficiary join together in a business venture. 2) adj. A relationship or situation where someone acts as a fiduciary for another.

History and Meaning of Fiduciary

The term "fiduciary" originated from the Latin word "fiducia," which means trust. It refers to a person or entity that has a legal obligation to act in the best interests of another party, known as the beneficiary. The fiduciary is held to a higher standard of loyalty, good faith, and honesty in their dealings with the beneficiary, and any conflicts of interest must be avoided.

The concept of fiduciary duty can be traced back to ancient times, where it was extensively used in Roman law. However, the modern concept of fiduciary obligation in common law was developed in English courts during the 19th century.

Examples of Fiduciary

  1. A lawyer has a fiduciary duty to act in the best interests of their client and avoid any conflicts of interest.
  2. A trustee of a trust has a fiduciary duty to administer the trust in the best interests of the beneficiaries and avoid self-dealing.
  3. An investment adviser has a fiduciary duty to act in the best interests of their clients, disclose all possible conflicts of interests, and avoid any activities that are not aligned with the client's goals.
  4. A real estate agent has a fiduciary duty to act in the best interests of their client, provide full disclosure, and avoid any conflicts of interests.
  5. A board member of a nonprofit organization has a fiduciary duty to act in the best interests of the organization and avoid any self-dealing, i.e., activities that could benefit them personally or privately.

Legal Terms Similar to Fiduciary

  1. Trustee - A person or entity appointed to manage and oversee a trust in the best interest of beneficiaries.
  2. Guardian - A person appointed by a court to care for a person who cannot care for themselves, such as a child or an incapacitated adult.
  3. Executor - A person appointed in a will to manage the estate of the deceased person and distribute assets to beneficiaries.