DEFINITION of 'Fiduciary Abuse'

Describes a situation in which an individual who is legally appointed to manage another party's assets uses his or her power to benefit financially in an unethical or illegal fashion.

BREAKING DOWN 'Fiduciary Abuse'

Fiduciary abuse can be practiced by agents such as a financial advisor, or power of attorneys. Examples include a financial advisor borrowing funds from client's account in order to take speculative positions in securities, or even a close family member (acting as power of attorney) misrepresenting a legally incapacitated family member as a way to steal assets.

People can protect themselves from fiduciary abuse by taking an active role in their money management or by setting up an irrevocable trust.

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