Fiduciary responsibility and opportunity.

• Author: Primoff, Walter M.

Fiduciary responsibility is a special and important concept for CPAs in tax and financial planning practices, one that is twofold: fiduciary obligations to clients, which go well beyond acting as an executor or trustee, and the significant and profitable role that CPAs can play in helping clients who serve as estate executors or trustees, to fulfill their fiduciary duties.

Fiduciary Duty Defined

Fiduciary duty is imposed on a person who accepts being placed in a position of great trust by another individual or entity and, as a result, is required to fulfill important legal responsibilities in exercising that trust. While the concept of fiduciary duty is commonly associated with executors and trustees, it is much broader.

An entire body of law, treatises and related journal articles define this topic. Fiduciary duty may be imposed by statute or by the courts. It may be created (sometimes unintentionally) by a person holding out and acting in a manner that causes another individual to place special trust in that person. Often (as with CPAs or attorneys), persons held to a fiduciary standard have professional or other special expertise that a client lacks. A fiduciary is often entrusted with another's assets or is providing trusted advice in relation to those assets.

In describing the responsibility and trust elements that a person with fiduciary duty owes to another individual, judicial decisions contain such terms and phrases as: due care, loyalty, fidelity, good faith, candor, diligence, full disclosure of conflicts, professional skill and best efforts. Fiduciaries are required to perform professional or other services with all of the expertise, loyalty and due care that they possess.

Dan L. Goldwasser, a prominent attorney and one of the foremost experts in CPA legal matters, explains that the principal duties of a fiduciary are:

* A duty of loyalty to a client or other parties for whom an individual or institution is acting as a fiduciary, requiring fiduciaries to: (1) always act in the best interests of their clients or such other parties and (2) subordinate their interests to those of their clients or such other parties.

* A duty to try to avoid conflicts of interests with the client or other parties for whom they are serving as a fiduciary and to advise them of any such conflicts.

* A duty to maintain the confidences of the client or other parties for whom they are serving in a fiduciary capacity.

* A duty of disclosure, requiring the...