Legal Definitions - fiduciary debt

Fiduciary Debt

Fiduciary debt is a type of debt that arises from a fiduciary relationship, rather than from a purely contractual relationship.

A fiduciary relationship is one in which one party (the fiduciary) is entrusted with the care of another party's assets or interests. Fiduciary debt arises when the fiduciary incurs debt on behalf of the other party, such as when a trustee takes out a loan to manage a trust's assets.

• A trustee takes out a loan to invest in a trust's assets.
• An attorney incurs debt on behalf of a client to pay for legal fees.
• A financial advisor borrows money to invest in a client's portfolio.

These examples illustrate how fiduciary debt arises from a relationship of trust and responsibility. The fiduciary is obligated to act in the best interests of the other party, and the debt incurred is for the benefit of the other party's assets or interests.