A fiduciary relationship involves one person, the trustee, managing the needs or property of another person, the beneficiary, and acting in their best interest. This relationship can exist in various situations, such as through a power of attorney, legal advice, or court-appointed guardianship. Trusts, executors, and personal estate representatives are also examples of court-appointed trustees. Healthcare surrogates may be appointed to make medical decisions for incapacitated individuals.
In a fiduciary relationship, one person, the trustee, is in charge of managing the needs or property of another person, the beneficiary. In general, a trustee must act in the best interest of the beneficiary rather than the interest of the trustee itself. Most fiduciary relationships are characterized by certain fiduciary duties. For example, the trustee generally undertakes to maintain a high degree of trust, loyalty and truthfulness when acting on behalf of the beneficiary.
A fiduciary relationship can exist in a variety of different situations. Some of the most common fiduciary relationships are created through a power of attorney, which is simply a legal document in which one person, called a principal, authorizes another person, called an agent, to make certain decisions on behalf of the principal. In offering legal advice, attorneys generally act as a fiduciary for their clients. Bankers, accountants and financial advisers generally also act in a fiduciary capacity when investing on behalf of their clients or offering financial advice.
Frequently, ex officio fiduciary relationships are also concluded between a trustee and a beneficiary. For example, a court may appoint a grandparent, uncle, or older brother to be the guardian of a girl whose parents are deceased or unable to care for her. In this capacity, the guardian acts as a trustee and is charged with acting in the girl’s best interest. Guardians may also be appointed for mentally incapacitated or elderly individuals.
Trustees, executors, and personal estate representatives are another category of court-appointed trustees. A registrar trust relationship typically forms when a court determines that a person is unable to manage their financial affairs. Under court supervision, the conservator manages the property for the benefit of the incapacitated. Executors and personal estate representatives are usually appointed to administer the estate of a deceased person. Courts often appoint attorneys or trust companies to carry out this type of fiduciary relationship and are responsible for inventorying assets, paying bills, and distributing real estate.
A trust is a legal entity that revolves around a fiduciary relationship. When a person creates a trust, they typically appoint a trustee to manage the assets in the trust. In this capacity, the trustee acts as a trustee and is generally charged with acting in the best interests of the beneficiaries of the trust or the settlor.
Relationships of trust are also frequently established in the health sector. For example, a healthcare surrogate may be appointed to make medical decisions on behalf of a person who becomes incapacitated. This type of trust relationship is usually created through a document called an advance medical directive or health care durable power of attorney.
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