What Are the Three Duties of a Fiduciary?
If you are a California senior, an adult child helping a parent from another state, or a family member serving as trustee, executor, power of attorney (POA) agent, or conservator, you have probably heard the phrase “fiduciary duty.”
You know you should act in the other person’s best interest.
The harder part is understanding the details:
What are the three duties of a fiduciary, and how serious are they in California trusts and estates?
This guide breaks fiduciary duty into three clear responsibilities and illustrates how they manifest in daily decisions, particularly in trust and estate accounting. It also explains how a specialised CPA firm like Smith Marion supports fiduciaries with clear, court-ready numbers.
This is general information, not legal advice. It can help you ask better questions and decide when to speak with an attorney or adviser.
What Are the Three Duties of a Fiduciary?
While the law can list several duties, you can think of fiduciary duty as three core responsibilities:
- Duty of loyalty – put the other person’s interests first.
- Duty of care – make careful, well-informed decisions.
- Duty of disclosure – keep records, communicate clearly, and share key information.
In California, these duties appear in trustee and estate standards under the Probate Code and in the way courts expect accountings to be prepared.
A fourth idea, good faith, runs through all three. Good faith means the fiduciary acts honestly and fairly, even when decisions are difficult.
What Is the Duty of Loyalty for a Fiduciary?
The duty of loyalty requires a fiduciary to put the other person’s interests ahead of their own.
This applies to roles such as:
- Trustee of a trust
- Executor or personal representative of an estate
- Agent under a financial power of attorney
- Conservator or guardian of the estate
What loyalty looks like in practice
A fiduciary who honours the duty of loyalty:
- Uses assets for the benefit of the person or estate, not for personal gain
- Follows the trust, will, POA, or court order instead of personal preference
- Avoids conflicts of interest as much as possible
- Discloses conflicts and handles them openly when they cannot be avoided
Example:
A trustee sells a house owned by the trust. They seek a fair market offer and consider what benefits all beneficiaries, rather than offering the property to themselves at a discount.
What breaks the duty of loyalty?
The duty of loyalty is broken when a fiduciary:
- Pays personal bills from trust or estate accounts
- Give themselves “loans” from funds without clear authority
- Directs contracts, sales, or fees to themselves or close contacts on unfair terms
- Hides transactions that would raise questions if others saw them
In California, breaches of loyalty can lead to removal, personal liability, and court orders to repay losses.
How Smith Marion helps with the duty of loyalty
Loyalty is easier to show and defend when the numbers are clear.
Smith Marion supports the duty of loyalty by:
- Preparing independent trust and estate accountings that show every receipt and disbursement
- Separating legitimate expenses from personal spending
- Giving attorneys and courts a clear picture of what actually happened with funds
For honest fiduciaries, this transparency protects their reputation. For families with concerns, it provides facts instead of guesswork.
What Is the Duty of Care for a Fiduciary?
The duty of care requires a fiduciary to act with the care a prudent person would use with their own finances in similar circumstances.
It does not demand perfection. It does demand effort, organisation, and sound judgment.
What care looks like in practice
A careful fiduciary:
- Reads and understands the trust, will, POA, or court order before acting
- Keeps track of income, expenses, and asset changes in a clear system
- Uses professional help (CPA, attorney, investment adviser) when needed
- Chooses investments and spending patterns that match the person’s needs and goals
Example:
An executor reviews the will, confirms all estate assets, and uses a simple but complete tracking system so every bill, fee, and distribution can later be explained.
Common duty-of-care problems
From a numbers standpoint, many problems come from care, not intent. For example:
- Sloppy transaction coding – income and principal mixed, unclear categories
- Missing explanations – checks written to “cash” or to the fiduciary with no memo or backup
- Incorrect accounting format – court accountings that do not follow the pattern required by the Probate Code (beginning assets → receipts → disbursements → gains and losses → property on hand at the end of the period).
These issues can lead courts to reject accountings, causing delays and extra costs.
What Is the Duty of Disclosure for a Fiduciary?
The duty of disclosure requires a fiduciary to maintain clear records and share important information with individuals who have a right to access it, such as beneficiaries or the court.
In real life, this is the duty that most often causes friction.
What disclosure looks like in practice
A fiduciary who honours the duty of disclosure:
- Saves bank statements, receipts, and investment reports
- Provides accounting to beneficiaries when required by law or by the trust
- Responds to reasonable written requests for information
- Works with professionals to keep reports readable and complete
In California, trustees and other fiduciaries often must provide formal written accountings, especially after a trust becomes irrevocable or a court is involved.
Common disclosure failures
Smith Marion frequently sees:
- Years with no formal accounting
- Informal verbal updates instead of written reports
- Refusal to share copies of the trust or basic statements
- Accounts that leave out certain assets, debts, or transactions
These may not prove fraud, but they can be a breach of the duty to keep people informed and often trigger deeper review.
Good Faith: The Thread Through All Three Duties
Alongside loyalty, care, and disclosure sits good faith. Good faith is the expectation that fiduciaries act honestly, correct mistakes, and handle disagreements fairly.
Good faith does not erase the need for records, reports, and compliance. Courts examine what was done and how it was documented, not just the intentions. But when good faith is combined with strong accounting and communication, most fiduciary relationships become easier to manage.
Common Myths About the Three Fiduciary Duties
Several myths work against the duties of loyalty, care, and disclosure:
“Good intentions are enough if you are family.”
Courts respect good motives, but they judge actions and records. A caring family member can still breach duty by mixing funds, skipping accountings, or ignoring court rules.
“If everyone gets along, we do not need formal accountings.”
In many California situations, accountings are required by statute or by the trust itself. Waiving them can weaken protection for both beneficiaries and fiduciaries.
“Small shortcuts in recordkeeping do not matter.”
Small gaps add up. Missing receipts, unclear memos, and mislabeled entries are common reasons a court questions or rejects accountings.
“Only professionals are fiduciaries.”
If you are named in a trust, will, POA, or court order and you act under that authority, you are a fiduciary by designation, even without a license.
Understanding these myths helps families recognise why the three duties are relevant in day-to-day choices, not just in major disputes.
How California Law and Oversight Shape Fiduciary Duties
If you serve as a fiduciary in California, your duties are shaped by:
- The California Probate Code establishes standards for trustees, executors, conservators, and guardians, including the requirements for accountings to demonstrate receipts, disbursements, gains and losses, and property on hand at the end of a specified period.
- California Professional Fiduciaries Bureau – regulates licensed professional fiduciaries and sets education and ethics requirements for those who serve multiple clients.
- Judicial Council and local probate courts – enforce accounting formats and review whether fiduciaries have met their obligations in specific cases.
Smith Marion does not replace legal counsel. Instead, the firm helps fiduciaries comply with accounting and reporting requirements, allowing attorneys to focus on legal strategy and courts to rely on accurate financial information.
How Smith Marion Helps You Live Out the Three Duties
Many clients contact Smith Marion at key stress points, such as:
- Learning that they must file a court accounting as a trustee, executor, or conservator
- Receiving a notice that a prior accounting was rejected or incomplete
- Hearing concerns from beneficiaries about missing information or possible self-dealing
- Stepping into a fiduciary role for the first time and feeling overwhelmed
Smith Marion’s trust and estate team:
- Prepares trust, estate, guardianship, and conservatorship accountings in court-ready formats
- Helps set up practical systems for tracking income, expenses, and asset changes
- Supports both family fiduciaries and professional fiduciaries as the numbers-focused partner on the team
The focus is on clear, credible reporting that supports the duties of loyalty, care, and disclosure.
Next Step: Talk with Smith Marion
If you are trying to understand what the three duties of a fiduciary are and how they apply in your real situation, you do not have to sort it out alone.
Smith Marion has supported trustees, executors, POA agents, conservators, beneficiaries, and professional fiduciaries with trust and estate, guardianship, and conservatorship accounting for many years.
You can:
- Fill out an Interest Form for fiduciary assistance or trust and court accounting.
- Schedule a consultation to review your role, review your records, and discuss next steps.
- Request the Fiduciary Assistance Services Guide if it fits your needs.
Bring your documents and your questions. Smith Marion can provide clear accounting, structured support, and court-ready reports so you can carry your fiduciary responsibilities with more confidence and less stress.
FAQ: What Are the Three Duties of a Fiduciary?
What are the three main fiduciary duties?
The three main fiduciary duties are the duty of loyalty (putting the other person’s interests first), the duty of care (making careful, well-informed decisions), and the duty of disclosure (keeping clear records and sharing key information when required).
Do these fiduciary duties apply in California?
Yes. In California, these duties appear in the Probate Code and in court expectations for trustees, executors, conservators, guardians, and agents under a financial power of attorney.
How do these duties manifest themselves on a day-to-day basis?
They shape how you spend money, manage investments, keep records, and report to beneficiaries and the court. Each check written and each decision about assets should reflect loyalty, care, and disclosure.
Can a professional fiduciary help with these duties?
Licensed professional fiduciaries are trained to meet these duties and often work with CPA firms and attorneys to manage finances, reporting, and court requirements for seniors and vulnerable clients.