Executors, trustees, and other individuals who play a role in estate planning are required to exercise what are known as fiduciary duties. These obligations are among the most serious, so violating them can mean major repercussions. Whether you’re a fiduciary or someone who benefits from an estate, it’s critical to understand the nature of these responsibilities. The Estates and Trusts team of SederLaw is here to help.
What Is A Fiduciary?
Generally, a fiduciary is someone who holds a position of trust imposed by law. Fiduciaries are typically considered in terms of their relationships with third parties. They are required to put the interests of those third parties first and to serve those individuals with the highest standards of ethical conduct.
In the context of estate planning, fiduciaries include individuals such as executors (for wills) and trustees (for trusts). These fiduciaries must put the interests of the estate, the trust, beneficiaries, or heirs first. For example, in managing a trust, a trustee must act in the best interests of its beneficiaries. Even though trustees can themselves be beneficiaries, they still owe an obligation both to the trust itself and to any other beneficiaries.
What Is Considered A Breach Of Fiduciary Duty?
A breach is a violation of some duty imposed upon a fiduciary. If a fiduciary is acting dishonestly or is otherwise not fulfilling his or her duties, there is a good chance a breach has occurred. A breach may be an action that is itself against the law, but it need not be; it can simply be an unethical act. Some examples of fiduciary breaches include:
- Fraud, theft, or conversion
- Conflict of interest
- Self-dealing (e.g. assigning estate property to oneself)
- Disloyalty to beneficiaries
- Improperly favoring one beneficiary over another
- Colluding with some beneficiaries to deprive others of their estate assets
- Poor judgment (e.g. making incompetent investment decisions using estate assets)
- Stealing or misusing property that belongs to estate heirs
If an individual breaches his or her fiduciary duty, estate beneficiaries can file a lawsuit to remove and replace that person. The fiduciary can also be held liable for damages. These are among the specific forms of relief that beneficiaries and heirs can seek:
Monetary damages. These are intended to return the beneficiary or heir to the position he or she would have been in had the fiduciary not breached their duty. For example, if a trustee misused trust assets to enrich himself at the expense of beneficiaries, he may have to repay that money.
Injunction. An injunction can be sought to limit the trustee’s or executor’s actions or compel the person to perform some duty. Injunctions are often sought as a temporary form of relief when there is great risk of immediate and significant financial loss.
Removal. As mentioned above, the trustee or executor may be removed from his or her role in managing the trust or estate.
Property transfer. Some breaches occur because a fiduciary has wrongfully transferred property to him- or herself. Therefore, one type of remedy may be to order the property to be transferred back to the beneficiaries or heirs.
Contact SederLaw Today For A Consultation
These are not the only potential remedies the court may devise. Perhaps the most important step a beneficiary or heir can take if he or she suspects misconduct is to seek legal counsel immediately. By the same token, if you’ve been accused of breaching your fiduciary duty, you should retain an experienced attorney. SederLaw is here to advise you on your rights and responsibilities, no matter if you’re an heir, beneficiary, or fiduciary. Call us today to learn more.