Inherited property can quickly go from financial boost to a major headache.
What is fiduciary duty?
Fiduciary duty is a requirement that a person in a position of trust, such as a real estate agent, broker or executor, must act in good faith and honesty on behalf of a client.
Fiduciary duty is a legal obligation of the highest degree for one party to act in the best interest of another. The party charged with the obligation is the fiduciary, or one entrusted with the care of property or money.
The person to whom a fiduciary owes his or her duty is known as the principal or beneficiary. The fiduciary must work to the best of his or her ability to benefit the principal and bring about a satisfactory result or capable stewardship of principal’s assets.
Courts have not expressly designated circumstances that constitute fiduciary relationships. Theoretically, anything that two individuals agree upon to be a fiduciary relationship is one. However, there are some relationships that are usually expressed as fiduciary. These are:
Though many of these relationships have a financial component because they deal with money or the exchange of property, fiduciary duty is commonly understood as a legal concept, due to the duties associated with taking on one such responsibility.
If fiduciaries breaches their responsibilities, they must account for the unethically acquired profit. Their principals are entitled to damages, even if the principals suffered no harm in the breach.
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Fiduciary duty example
When you are looking for a home, you likely will enlist the help of a real estate agent to help you find the house that you want. You would provide this agent with the necessary information regarding the type of house you want and the budget you’ve allocated for this purchase. It is your agent’s responsibility to find you a reasonable house within the budget you’ve laid out. When you enter into the relationship with a real estate agent, they assume fiduciary duty for your home purchase.