Fiduciary/Beneficiary Duties

Fiduciary

A fiduciary is a legal or ethical relationship of trust between two or more parties. Typically, a fiduciary takes care of money for another person. The legal duty of a fiduciary to act in the best interests of the beneficiary.

As per California’s Supreme Court, duty is defined as arising whenever trust and confidence is reposed by one person in the integrity and fidelity of another and that person obtains control over the other person’s affairs. In simpler terms, it is a legal relationship evolving between two or more members involving the legal responsibility for:

    • Investing Money
    • Acting for a party’s benefit
    • Disclosing all material facts
    • Employing logical care to avoid clients that misleads

In a partnership lawsuit you will often see causes of action for breach of contract (the partnership agreement), fraud (a partner misrepresented or concealed a material fact), breach of fiduciary duty (the partner betrayed the plaintiff) and accounting (let’s figure out how much the partner stole or how much damage he or she caused). A breach of fiduciary lawsuit in California must include the following elements:

    1. A fiduciary duty,
    2. A breach of that fiduciary duty, and
    3. Damage arising from that breach of duty.

 

The plaintiff will have the burden of proving that the defendant had a fiduciary towards him or her and that the plaintiff breached that duty. Moreover, plaintiff must prove that some damage arose from the breach of the duty.

Beneficiary

A beneficiary is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is possible to have a company as the beneficiary of a trust, and this often happens in sophisticated commercial transaction structures. With the exception of charitable trusts, and some specific anomalous non-charitable purpose trusts, all trusts are required to have ascertainable beneficiaries.

Many relationships between trustee and beneficiaries go bad because the beneficiary did not understand the purpose or the operation of the trust, the role and duties of the trustee or his or her responsibilities and rights as a beneficiary. To ensure that you are an active participant in the trustee-beneficiary relationship, you should understand at a minimum:

    1. The purpose of the trust;
    2. The instructions in the trust document to the trustee;
    3. The limitations on the trustee powers;
    4. The beneficiaries’ powers, such as demanding an accounting and changing trustees;
    5. The beneficiaries’ responsibilities, such a providing receipts for expenses;
    6. How the management of trust assets should further the purpose of the trust

 

 

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Boesch Law Group

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