A fiduciary is an individual or entity that has the legal and ethical obligation to act in the best interests of another party, known as the principal or beneficiary. This trust-based relationship is characterized by a duty of loyalty, care, and full disclosure. Fiduciaries are often entrusted with significant responsibilities and must place the interests of the principal above their own.
Fiduciaries can take many forms, including but not limited to:
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Trustees: Individuals or organizations that manage trust assets on behalf of beneficiaries. They must adhere to the terms of the trust and act solely for the benefit of the beneficiaries.
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Executors: Appointed individuals responsible for administering an estate after a person’s death, ensuring that the deceased’s wishes are followed in accordance with their will, and managing estate assets responsibly.
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Guardians: Individuals who are legally appointed to care for another person (such as a minor or an incapacitated adult) and their affairs, ensuring their well-being and making decisions in their best interests.
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Investment Advisors: Professionals who manage client investments and must act in the client’s best interests, adhering to a fiduciary standard that requires them to avoid conflicts of interest and disclose relevant information.
In Texas, fiduciaries have specific legal responsibilities governed by state laws, which include adhering to principles of transparency, avoiding self-dealing, and maintaining accurate records. Breach of fiduciary duty can lead to legal consequences, including financial liability for any losses incurred by the principal.
For example, if a trustee sells trust property to themselves at a discounted price without informing the beneficiaries, this could be considered a breach of fiduciary duty, as the trustee failed to act in the best interest of the beneficiaries.
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