A fiduciary is a person or professional entity in a particular position of trust and responsibility to someone else. Their fiduciary duty is to act in the best interest of the other party. For example, an Executor has a fiduciary obligation to act in the estate beneficiaries’ best interest, and a Trustee has a fiduciary duty to act in the trust beneficiaries’ best interest. A Breach of Fiduciary Duty occurs when the fiduciary instead acts in the best interest of themselves or some other party.
Typical examples of a person with a fiduciary duty are Executors, Personal Representatives, Administrators, Trustees, Guardians and Agents under Powers of Attorney.
The most experienced professional fiduciaries hire experienced Estate Planning Attorneys to advise them. Hiring an advisor is excellent advice because as a fiduciary, you have the legal right to retain an experienced Estate Planning Lawyer to assist and advise you. There is no personal cost to you. The estate or trust pays the fee because obtaining advice when the chance for personal liability exists is a reasonable expense. Going without sound advice provided at no personal cost is foolish.
Fiduciaries should not use estate or trust assets for personal gain. Your decisions need be free of conflict and self-dealing. Sometimes the lines of what is your personal gain and what is best for the beneficiary are gray. When the lines are unclear, seek the advice of a seasoned Estate Planning Lawyer. Your lawyer can be a sounding board (at no cost to you) to help ensure your actions do not create personal liability.
To successfully execute a Breach of Fiduciary Duty claim, you must prove to the judge:
A Power of Attorney gives authority to a person who is called the Agent or the Attorney-in-Fact. This person owes a fiduciary duty to the individual who signed the Power of Attorney, the “Principal.” The document itself defines the exact extent of responsibility and thus fiduciary duty owed. Therefore, Agent liability will result if the Attorney-in-Fact’s actions conform or exceed the powers granted in the Power of Attorney.
As an illustration, typical Breaches of Agent Fiduciary Duty include:
If you are an interested party believing that an Agent has abused his position, you have the right to retain an Estate Litigation Attorney to force the Agent to provide a full accounting. This Agent Formal Accounting must include information on all assets and explain every action the Agent took. If the Agent committed a Breach of Fiduciary Duty, the judge could surcharge the Agent, forcing repayment out of the Agent’s personal funds. Further, the judge could Remove the Agent and appoint a Guardian of the Person and Guardian of the Estate.
An Executor has an obligation to expeditiously bring the estate to a conclusion maximizing the beneficiary’s inheritance. The Executor must gather the estate assets, settle the deceased’s debts and then distribute what remains according to the Will or the Rules of Intestacy.
If you are a beneficiary and believe that the Executor, Personal Representative or Administrator of the estate has committed a Breach of Fiduciary Duty you have the right to retain an Estate Litigation Attorney to obtain a court order forcing the fiduciary to provide a full accounting.
This Executor Formal Accounting must be in a particular format and provide detailed information on every estate asset. Further, the report must justify every expense. Equally important, if the judge finds the Breach of Fiduciary Duty caused financial damage, the judge can surcharge the fiduciary. Therefore, a judge ordered surcharge means the guilty party must refund the estate from the fiduciary’s personal funds. The judge may also Remove the Executor.
Typical Breaches of Executor Fiduciary Duty include:
If you are a trust’s beneficiary and believe that the Trustee has committed a Breach of Fiduciary Duty or Breach of Trust, you have the right to retain an Estate Litigation Attorney who will obtain a court order forcing the Trustee to file a full accounting. This Trustee Formal Accounting must explain every expense and every action taken from when the Trustee began. If the Trust has existed for decades, then the Trustee must account for decades of work. Equally important, if the judge finds the Breach of Fiduciary Duty caused harm, the judge may surcharge the Trustee. Therefore, ordering a surcharge means that if the Trustee cannot recover the funds, the Trustee must use his personal funds to repay the Trust. The judge also has the power to Remove the Trustee.
With this in mind, other Remedies for Breach of Trust include:
A judge may appoint a Guardian of the Estate for minors and Guardians for incapacitated adults. The Guardian owes a duty to collect the person’s assets and then to manage and preserve them for the minor or incapacitated person’s best interests.
If a Guardian Breaches the Fiduciary Duty owed, they can be personally liable for the damages. An interested party can retain an experienced Estate Litigation Attorney to bring the matter before the court. The judge can order a Guardianship Formal Accounting, surcharge the Guardian or even Remove the Guardian.
At one time the beneficiary of an estate had few rights, and executors held the upper hand. This has changed. Changes in the law have given beneficiaries legal rights to gather information and to more easily challenge the executor’s actions. Each situation is different, contact us for a free consultation and explain the specific facts and circumstances of your situation.
What a judge will find as a Breach of Fiduciary Duty is fact specific and differs from case-to-case, but her are some common examples of actions that judges believe constitute Breaches of Fiduciary Duty.
Yes, working with an experienced Estate Litigation Attorney can avoid conflict, including avoiding Breach of Fiduciary Duty claims.
If you are serving as a fiduciary, such as an agent under a power of attorney, executor under a will or a trustee under a trust, you owe the beneficiary a level of duty and responsibility. Unfortunately, sometimes years later a child or other person interested in your service will bring claim that you breached your fiduciary duty. Sometimes these claims are baseless, sometimes they are based on 20/20 hindsight, and other times they are simply because the interested person wants clarification. While serving as a fiduciary you should prepare for these claims. If you do not, and if your information is incomplete years in the future, the court can fine you. This fine is called a Surcharge.
If you are considering taking the job to serve as an agent, executor or trustee, you may not be aware of all the responsibilities that come with that job. You may simply wish to help friend or family member, but you likely do not wish to become involved in costly litigation or be surcharged for accidentally making a mistake for which you are personally responsible. In most cases, within the terms of most powers of attorney, agents are allowed to hire a legal advisor to assist them in carrying out their duties. Trustees and executors are almost always afforded the ability to use estate or trust funds to retain a litigation attorney to advise them.
Our attorneys, with vast experience in trust and estate matters, can help advise you and help you avoid traps and pitfalls. If you are currently serving as an agent, executor or trustee, or if you are considering taking on that fiduciary responsibility, contact one of our experienced estate litigation attorneys to represent you.
If you are a fiduciary, you can use our advice to avoid personal liability and litigation. If you are a beneficiary, we can discuss the pros and cons of pursuing a Breach of Fiduciary Duty Claim. Both prosecuting and preventing estate litigation are a large part of our Estate Litigation Lawyer practice. Breaches of Fiduciary Duty actions are not a part-time job for us!
Feel free to Contact our office to set up a free consultation. We try to make the process as painless as possible!
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