What is fiduciary?

The word fiduciary is normally used in economic fields to refer to a person or a thing. This word has its origin in the Latin term fiduciarius, in which the Latin root fidus means faith. Hence, the term fiduciary refers on many occasions to certain types of agreements that are based on trust.

Trustee in reference to a person

In a simple way we can define the word fiduciary as a person in charge of managing the assets of another. A person acting as a fiduciary has the responsibility of managing another person's money, property or wealth. This management or administration must be carried out in such a way that it always acts for the benefit of the person who is represented and following their guidelines.

When a fiduciary participates in a commercial agreement or of any kind, a series of elements will inevitably participate in said agreement. The person represented by the trustee and who is called the settlor. As well as, the assets or assets managed by the trustee called escrow. Usually these three elements, trustee, settlor and trust and their commitments and characteristics are reflected in a private document before a notary public.

Trustee in reference to one thing

In economic areas the term fiduciary is also used with other meanings. It is quite common to hear this term related to the words value and currency. In these cases fiduciary is used with the following meanings.

  • The fiduciary security that is a security issued by a security that it represents. Examples of fiduciary securities are promissory notes or bills of exchange.
  • The fiat currency, which are the coins and bills that we use daily, since they represent a value that is not real. In addition, this value of the currency is based on full confidence in the monetary system.

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