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A fiduciary is a person who acts on behalf of another person (or people) to manage assets. The most common type of fiduciary is a trustee of a trust. However, a fiduciary may also be a banker, corporate officer, board member, attorney, accountant, executor or guardian. A person is typically appointed as a fiduciary because he has a high level of skill in handling the duties assigned to him.

In handing these duties, the fiduciary is held to the highest standard of conduct, which is often referred to as the prudent person standard of care. This involves acting in the best interest of the clients or beneficiaries being served. It is one of the highest standards of care in the legal system.

A fiduciary’s standard of care involves acting in good faith and avoiding any self-dealing and conflicts of interest.  For instance, a corporate executive who knows his company is going to buy some land for a new factory cannot buy the land himself and then sell it to his company at a profit.

A fiduciary is often required to file a periodic accounting of his activities.  For an estate executor, this is an estate inventory that is filed with the probate court.  For business executives, the accounting consists of the corporation’s annual audited financial statements.

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