Capacity identifies the legal or organizational role in which a person acts. Authority identifies the powers connected to that role. A person may operate in multiple capacities: individual, trustee, agent, officer, representative. Each capacity carries different powers, duties, limitations, liabilities, and records. The same person may have authority in one capacity and no authority in another.

Capacity and authority are foundational to fiduciary governance. Without clear capacity, it is impossible to determine what duties apply. Without clear authority, it is impossible to determine whether an action is permitted. Proper fiduciary administration requires that every action be traceable to an identified capacity and a recognized source of authority.

Capacity determines the role in which a person acts, while authority determines the power that role may lawfully exercise. Proper fiduciary governance requires identifying both before action is taken.

Before any fiduciary or institutional action occurs, the record must identify:

1. actor (who is taking the action);
2. capacity (in what role is the actor operating);
3. authority source (where does the power come from);
4. scope of authority (what specific powers are granted);
5. represented interest (on whose behalf is the actor acting);
6. applicable duty (what obligations attach to this capacity and authority); and
7. signature capacity (how the actor signs to indicate capacity).

Authority must be traceable. If the source of authority cannot be identified and produced as a record, the action is vulnerable to challenge for exceeding authority.

Capacity and authority are distinct but interrelated concepts in fiduciary law. Key elements include:

• Personal Capacity: A person acting for personal interests, with no fiduciary duties to others beyond general legal obligations. Personal actions are subject to ordinary contract, tort, and property law.
• Fiduciary Capacity: A person acting for the benefit of another, with duties of loyalty, care, accounting, and impartiality. This includes trustees, agents, guardians, executors, and corporate officers.
• Trustee Capacity: A specific fiduciary role involving legal title to trust property, equitable duties to beneficiaries, and powers defined by the trust instrument and law.
• Agent Capacity: A person authorized to act on behalf of a principal, subject to the principal’s control and limited to the scope of actual authority granted.
• Institutional Office Capacity: A person exercising powers that belong to the office (e.g., director, officer, committee member), subject to organizational governance documents and statutory limitations.
• Delegated Authority: Authority may be delegated from a principal or superior fiduciary, but delegation must be properly documented and limited by the delegator’s own authority.
• Actual Authority: Power expressly or implicitly granted by the principal or governing instrument. Actual authority is the primary basis for lawful fiduciary action.
• Apparent Authority: Power that a third party reasonably believes exists based on the fiduciary’s conduct or representations, even if not actually granted. Apparent authority may bind the principal or trust despite lack of actual authority.
• Limited Authority: Most fiduciary authority is limited by the governing instrument, applicable law, or both. Fiduciaries cannot expand their own authority without proper amendment or consent.
• Exceeding Authority: Acting beyond the scope of granted authority may constitute a fiduciary breach, expose the fiduciary to personal liability, and render the transaction voidable.
• Relationship Between Authority and Liability: A fiduciary who acts within properly documented authority and capacity reduces liability exposure; a fiduciary who acts without authority or in unclear capacity increases liability risk.
• Importance of Written Records: Capacity and authority must be documented contemporaneously. Oral assumptions or informal understandings are insufficient for fiduciary governance.

• Restatement (Third) of Trusts § 2 – A trust is a fiduciary relationship in which the trustee holds property subject to equitable duties. Capacity and authority are inherent in this relationship.
• Restatement (Third) of Trusts § 70 – A trustee has the powers necessary or appropriate to carry out the trust’s purposes, except as limited by the terms or law.
• Restatement (Third) of Trusts § 76 – The trustee has a duty to administer the trust, which requires knowing the scope of authority and acting within it.
• Restatement (Third) of Trusts § 78 – The duty of loyalty requires that the trustee not use trust authority for personal benefit without proper authorization.
• Uniform Trust Code § 701 – A person may accept or decline a trusteeship; acceptance triggers capacity and authority under the trust.
• Uniform Trust Code § 801 – Upon acceptance, the trustee shall administer the trust in good faith, which includes acting within granted authority.
• Uniform Trust Code § 802 – The duty of loyalty prohibits transactions involving conflicts unless properly authorized.
• Uniform Trust Code § 815 – A trustee has general powers enumerated in the UTC, but those powers may be enlarged or limited by the trust terms.
• Uniform Trust Code § 816 – Specific powers of trustees include selling property, leasing, borrowing, investing, and employing agents, all subject to the duty of prudence.
• Restatement (Third) of Agency § 2.01 – Actual authority is the power of an agent to affect the principal’s legal relations as reasonably understood from the principal’s manifestations.
• Restatement (Third) of Agency § 2.03 – Apparent authority is the power to affect the principal’s legal relations when a third party reasonably believes the agent has authority.
• Scott and Ascher on Trusts – The trustee’s powers are derived from the trust instrument and applicable law; acting beyond those powers is a breach.
• Bogert, The Law of Trusts and Trustees – A trustee must not exceed the powers granted; unauthorized acts may be set aside and the trustee surcharged.

These authorities reflect broadly recognized fiduciary, trust, and agency principles. Specific application depends on jurisdiction, governing instruments, organizational documents, facts, and competent professional review.

Capacity and authority apply across all fiduciary relationships and institutional contexts:

• Trust Administration: A trustee must accept the role in writing, identify capacity in all transactions, and act only within powers granted by the trust instrument or statute. Trustee signatures should include capacity designation (e.g., "John Doe, Trustee").
• Organizational Governance: Officers and directors must have role descriptions, authority resolutions, and approval procedures. Decisions require documented authority, such as board minutes or officer delegations.
• Agency Relationships: An agent’s authority must be defined in a written agency agreement, with clear limitations. The agent must not exceed actual authority and must disclose agency capacity when dealing with third parties.
• Institutional Systems: Organizations should maintain an authority matrix, capacity records, role documentation, and succession planning to ensure continuity when personnel change.

• Governing instrument (trust, will, agency agreement, organizational charter).
• Appointment records (court order, organizational resolution, nomination).
• Acceptance documents (written acceptance of fiduciary role).
• Authority resolutions (board or member approval of specific powers).
• Delegation records (who delegated what authority to whom, when, and under what terms).
• Role descriptions for each office, committee, or fiduciary position.
• Operating agreements for LLCs or other entities defining capacity and authority.
• Bylaws where applicable, specifying officer and director powers.
• Trustee certificates or incumbency certificates for third-party reliance.
• Signature blocks showing capacity (e.g., "as Trustee," "as Agent," "as President").
• Meeting minutes documenting authorization of specific actions.
• Decision records linking each decision to the actor, capacity, and authority source.
• Approval records for transactions requiring multiple signatories or consent.
• Authority limitations (documents specifying what the fiduciary may NOT do).
• Succession records (who holds authority when the primary fiduciary is unavailable).
• Amendments and updates to authority documents.

Core rule: Capacity and authority must be proven by record. If it is not written, it is not authority.

• Failing to identify capacity before acting or signing documents.
• Signing without representative designation (e.g., "John Doe" instead of "John Doe, Trustee").
• Assuming title equals unlimited authority (e.g., "President" does not automatically mean authority to sell assets).
• Mixing personal and fiduciary roles (e.g., using trust funds for personal expenses).
• Acting outside granted powers without seeking amendment or consent.
• Failing to preserve appointment records, making it impossible to prove authority later.
• Unclear delegation – delegating authority orally or informally without documentation.
• Missing authorization documents for specific transactions (e.g., no board resolution for major sale).
• Confusing ownership with administration – an agent or trustee holds authority, not beneficial ownership.
• Confusing control with personal benefit – fiduciary authority is for the beneficiary’s benefit, not the fiduciary’s.
• Failing to update authority records when fiduciaries change or powers are modified.

KLI teaches capacity and authority because governance depends on accurate attribution. Every action requires answering: Who acted? In what capacity? By what authority? For whose benefit? Under what duty? Where is the record? Without capacity clarity, accountability becomes unclear. Without authority traceability, a fiduciary may be acting as a private individual or exceeding delegated powers, creating risk for both the fiduciary and the represented interest. Institutions that maintain clear capacity and authority records reduce breach risk, simplify succession, and enable effective oversight.

• What Is a Fiduciary? (KLI-KL-FID-001)
• Fiduciary Duty Explained (KLI-KL-FID-002)
• Duty of Loyalty (KLI-KL-FID-003)
• Duty to Account (KLI-KL-FID-004)
• Fiduciary Breach (KLI-KL-FID-008)
• Legal Title vs Equitable Title (KLI-KL-TRUST-001)
• Trustee Authority (KLI-KL-TRUST-008)
• Status, Standing, and Capacity (KLI-KL-SSC-001)
• Equity Follows the Law (KLI-KL-EQ-001)