When do banks have a fiduciary duty?
It is not uncommon for New Jersey banks and other financial institutions to offer services that involve the institutions acting as fiduciaries. These services typically involve handling personal matters on behalf of a client and doing what is right and necessary to obtain some kind of benefit for the client. However, it is important to remember that not every financial institution or position involves fiduciary duty, so bank owners and operators would be wise to understand when they have this duty and what could happen if it is breached.
If a banker has a fiduciary duty to a client, that individual must act in the best interests of the client. This duty requires that the fiduciary acts in a trustworthy, honest and loyal manner. If that does not happen and the client suffers harm because of a breach of that duty, it is possible for the banker or financial institution as a whole to face legal action.
Some common services that banking institutions offer that may require a fiduciary relationship include the following:
- Trust administration
- Executor duties when closing an estate
- Bill paying services
- Financial advisory services
Because acting in a fiduciary capacity comes with many obligations as well as risks, New Jersey banking and financial institutions will certainly want to determine which of their services may have this obligation. If not handled properly, these institutions could easily find themselves in difficult legal predicaments. Fortunately, experienced banking attorneys could help individuals and entities better understand their duties and how to avoid a breach of those duties that could lead to negative repercussions.