Serving as an executor, trustee, or personal representative for someone’s estate or trust is a major responsibility. The law, therefore, requires these trusted individuals, known as fiduciaries, to follow strict ethical and legal guidelines as they carry out their duties. When a fiduciary breaches his or her obligations, the heirs and beneficiaries of estates and trusts have the right to take legal action. The fiduciary accused of wrongdoing is entitled to present a defense of his or her actions as well. No matter whether you are a plaintiff or a defendant in a breach of fiduciary duty lawsuit, SederLaw’s Estates & Trusts team can represent you.
What Is A Fiduciary?
A fiduciary is someone who holds a position of trust. Because of this trust, the law considers a fiduciary to have great responsibility for the rights and interests of certain third parties. This relationship imposes certain obligations upon the fiduciary. For instance, a fiduciary is required to put the interests of the third party ahead of his or her own. As a result, the fiduciary must act with extreme care and diligence, observing high standards of ethical conduct.
Estate planning fiduciaries include executors, trustees, personal representatives, and others who play a role in managing or administering an individual’s trust or estate. These individuals are obligated by law to act in the best interests of estate heirs and trust beneficiaries. Failure to do so could open the fiduciary to legal action, up to and including being removed from the fiduciary role.
What Are the Fiduciary’s Duties?
A fiduciary must perform his or her duties in a manner that puts the interests of others first. These are a few specific examples of what the fiduciary must do with respect to an estate or trust:
Keep personal and estate/trust assets separate. There should be a clear dividing line between the personal property, assets, and business interests of the fiduciary and those of the estate or trust he or she is administering. The fiduciary is not permitted to use the estate or trust assets as his or her own. Nor should the fiduciary mix personal property with estate or trust property.
Loyalty. This duty essentially means putting the interests of the estate or trust first. It includes loyalty to the rights and interests of estate heirs and trust beneficiaries and encompasses a broad array of behavior. Having a conflict of interest with the estate or trust, and refusing to rectify it in any way, may be considered an example of disloyalty.
Impartial treatment of all heirs and beneficiaries. Not only must fiduciaries treat heirs and beneficiaries with loyalty, but there can be no bias in favor of one heir or beneficiary over another. In some estate and trust matters, an heir or beneficiary attempts to persuade the executor or trustee to unfairly side with him or her against others. This is improper.
Follow the will or trust instructions. As a general rule, the fiduciary is bound to do whatever is contained in the last will and testament or trust. This includes not only making asset distributions but also performing other duties such as paying taxes and creditors.
Keep accurate and complete records. Serving as a fiduciary entails a number of record-keeping responsibilities, along with obligations such as filing an accounting statement. Heirs and beneficiaries need to have confidence in what the executor or trustee is doing, so the fiduciary must keep accurate and complete records at all times.
Competence. In managing an estate or trust, the fiduciary must be competent. As an example, trustees are expected to make prudent investments with trust funds. Investments naturally carry some risk of loss, but making clearly unwise decisions could land the fiduciary in legal trouble.
Communication with heirs and beneficiaries. The fiduciary is expected to communicate regularly with heirs and beneficiaries. Often this entails specific duties like providing an accounting of assets or answering questions about decisions made on behalf of the estate or trust. A fiduciary who refuses to timely communicate with an heir or beneficiary runs afoul of this duty.
Examples of Breaches of Fiduciary Duties
A breach is a violation of the above or other duties. If a fiduciary is either intentionally violating the law or behaving unethically, there’s a good chance he or she is in breach. In other words, a breach could be an illegal action or it might constitute an unethical act or omission. Some specific examples of breaches include:
- Fraud, theft, or conversion of trust or estate assets
- Conflict of interest with the estate, trust, or an heir or beneficiary
- Self-dealing (acting in the fiduciary’s own best interests)
- Improperly favoring one heir or beneficiary over another
- Colluding with some heirs or beneficiaries to violate the rights or interests of others
- Incompetence (e.g. poor judgment or making unwise or reckless investment decisions with estate or trust assets)
- Failing to keep updated, accurate, and complete records
- Disregarding the instructions contained in the will or trust
- Lack of communication with heirs or beneficiaries
Potential Remedies for Breaches of Fiduciary Duty
Estate heirs and trust beneficiaries can take legal action to address a breach of fiduciary duty. Some possible remedies include:
- Requiring the executor, trustee, or personal representative to pay monetary damages
- Ordering the payment of legal fees and court costs if litigation is necessary
- A court injunction that either prevents the fiduciary from taking certain actions or requires him or her to do something
- Transferring misappropriated property from the fiduciary back to the heir or beneficiary
- Removal of the fiduciary
Meanwhile, the fiduciary has the right to defend against allegations that he or she is in breach. A judge will then decide whether a breach has been committed and what the appropriate remedy is.
Contact Our Worcester Breach of Fiduciary Duty Attorney
Regardless of whether you are an heir or beneficiary claiming a breach of fiduciary duty, or you are an executor, trustee, or other individual defending against the same, SederLaw can assist you. Our experienced Estates & Trusts attorneys understand what it takes to build a compelling legal case and advocate for the rights of our clients. Give us a call to connect with our team today.