What Is a Fiduciary’s Duty of Impartiality?

A fiduciary has several different responsibilities to the beneficiaries of an estate or a trust. Violating these could constitute a breach of fiduciary duty and being removed from this role or even being found personally accountable for financial mistakes that harmed the value of the trust or the estate.

One of these duties is a duty of impartiality. An executor or trustee cannot favor one beneficiary over another. If someone is serving as a trustee and is a fiduciary in that manner, they must balance the interest between the current and future beneficiaries. Future beneficiaries may be interested in how much the assets can grow over time, whereas income beneficiaries are interested in what they can receive right now.

The trustee cannot bend to pressure either side. By weighting the portfolio of investments in either particular direction the trustee is violating their duty of impartiality. The duty of impartiality also applies to the charging of expenses. Expenses that are charged against income will affect the income beneficiaries and charges against the principle will impact how much is inherited in the future.

Any distributions of principle or income to current beneficiaries should be made with impartiality in mind. Some people choose to appoint a professional trustee like a bank or a lawyer because those individuals might have more experience in handling complex concerns associated with a trust. This can also remove the personal level of connection that another family member has, which could cause friction between them and beneficiaries of the trust.

If you are not sure how to balance these competing interests or have more questions about how this applies to your estate, set aside a time to speak to a knowledgeable lawyer.