Paralegal Advanced Competency Exam (PACE) Practice Exam

In a fiduciary relationship, what is expected of the fiduciary?

1. To prioritize personal interests over the beneficiary's

2. To have a limited standard of care

3. To avoid conflicts of interest and protect the beneficiary's interests

4. To act independently without oversight

The correct answer is: To avoid conflicts of interest and protect the beneficiary's interests

In a fiduciary relationship, the primary expectation of the fiduciary is to avoid conflicts of interest and to protect the beneficiary's interests. This relationship is built on trust and confidence, where the fiduciary is obligated to act with the utmost good faith, loyalty, and care on behalf of the beneficiary. The fiduciary must place the beneficiary’s interests above their own and should take all necessary steps to ensure that decisions made are for the advantage and benefit of the beneficiary. This obligation encompasses a duty to avoid situations where the fiduciary's personal interests may conflict with those of the beneficiary. For example, a financial advisor managing a client's investments must conduct their actions in the best interest of the client, ensuring that the investment choices align with the client’s goals and risk tolerance. Thus, the fiduciary must be vigilant in safeguarding the beneficiary's welfare, providing the necessary transparency and accountability in all dealings. The other options do not reflect the true nature of fiduciary duties. Prioritizing personal interests is fundamentally at odds with the responsibilities inherent in a fiduciary relationship. A limited standard of care would imply a lower duty than what is required, contradicting the higher duty of care expected of fiduciaries. Acting independently without oversight undermines the accountability principle that is