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Fiduciary Duty

Fiduciary Duty
6 minutes
Kristina Beavers

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons).  A fiduciary duty is by definition, the highest legal form of obligation from one person to another person or entity.  If you own a business, you have a fiduciary obligation to that business. Which means you can be held legally responsible for actions that you take that might harm that business. This is why, in theory, people can go to jail for embezzling from their very own sole proprietorship. 

And that might be the weirdest part of the fiduciary duty, that in a lot of cases you don’t realize you are entering into that kind of relationship. When you become a parent, your whole world changes but nobody comes into the delivery room with a contract stating you now hold a fiduciary duty to this child. But you do. And when you get married, same thing. In fact, in some jurisdictions simply accepting a marriage proposal has fiduciary implications for the betrothed. 

Legal vs. Ethical or Moral Duties

When you drive a car, you have a “duty of care” which is why you can be held legally responsible for car accidents. Even in the case that you didn’t break any laws. If a child runs into the street, you still have the right-of-way but also have the legal responsibility to avoid an accident if reasonably possible. 

Let’s look at another example. A group of men have been friends for decades. They love each other and feel a strong moral obligation to one another. But unbeknownst to the rest, one of them is having an affair with another guy’s wife. They’ve been friends for ages and maybe the illicit couple feel justified for reasons of abuse or neglect. Even though this qualifies as being a bad friend, the person who is breaking their fiduciary duty is the wife, not the friend. 

The fiduciary duty requires complete honesty and disclosure of any relevant information. It’s been said that the fiduciary duty does not allow for “...a scintilla” of disloyalty. This can be confusing because surely in the situation above the friend has been disloyal. But the issue at hand is that two friends, no matter how well they know each other, are not necessarily in a fiduciary relationship whereas two married people absolutely are. 

It’s not just Money

It’s a common misconception that fiduciary duty is limited to money. The term is used often in the marketing materials for financial advisors and lawyers. And while it’s easiest to quantify harm when it involves monetary value, a fiduciary obligation is any kind of harm. As noted above, you have a fiduciary duty to your children. If you are found guilty of child abuse or neglect, that is certainly not a monetary harm. 

What about Fiduciary Obligations for Lawyers

Lawyers are not only more likely than others to recognize when they have a fiduciary duty, but they also have been specifically trained how to maintain fiduciary duty. That’s why one of the very first things a lawyer does after your initial consultation (or before if they have the necessary data) they will go through a “conflict check.” Each state is different but all states require lawyers to have a fiduciary duty to their clients so conflict checks have to happen at some point. This is when your lawyer makes sure that bringing you on as a client, or sometimes even just talking to you about a situation, isn’t going to impact their fiduciary responsibility to other clients. 


  • If your spouse uses the family lawyer to perform your real estate transaction (and both spouses are on the deed) then neither of you can use that lawyer in a divorce mediation without the express agreement of the other spouse, because the information about the value of the real estate may have implications in the divorce action.
  • Your child is the victim of medical malpractice. The lawyer must make sure they have never represented the doctor, the hospital or any member of the hospital staff or board in any capacity. Perhaps even fighting a speeding ticket. 

It’s absolutely reasonable and for some practices common to have conflict waivers. This means both the old party and the new party sign away conflict issues. But even with conflict waived, the fiduciary duty remains. These waivers are usually only used in cases where a practical overlap is very unlikely. Like the situation above where maybe a lawyer represented a hospital’s janitor in the case of a  speeding ticket. It’s extremely unlikely that this janitor’s past legal issues will ever overlap in any way with the new client’s medical malpractice case. 

When does the Fiduciary Duty end 

While there might be a limit to the time when a Fiduciary Duty might expire, most lawyers consider their professional Fiduciary Duty to their clients to be ongoing forever.  

If you are the Trustee or personal representative of an estate, your fiduciary duty exists until all of the obligations of that Trust or estate are completed.

If you are the owner or responsible person in a company, your fiduciary duty exists as long as the company exists, even if you have retired and are no longer actively involved in the day-to-day workings of the company.

Self Dealing

A very common case for someone breaking fiduciary duty is self dealing. We see this most often when family members are appointed as Executors or Personal Representatives of Estates without fully understanding their roles. Uncle Jeb is appointed as the Executor of Grandma’s Estate and he decides to sell her car to himself, or maybe a buddy, for less than market value.  That’s self-dealing. If Grandma would have been okay with it or not doesn’t matter. Uncle Jeb has a fiduciary responsibility to the Estate. He must sell the car at market value and the profits go to the Estate. 

Fiduciary duty is the highest legal obligation a person can have to another person or entity. If you are unsure whether you have a fiduciary duty or not, speak to an attorney. The attorney should be able to walk you through all of your responsibilities and the penalties for falling short of those responsibilities.   

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