Breach of Fiduciary Duties
When a person has passed away, his or her property usually passes to loved ones by one of three ways; a will or trust or by intestacy (intestacy means dying without a will or trust, intestate). However, the process does not happen automatically. Someone must be placed in a position of control over the estate to make sure that things go smoothly. It is common for people to appoint their children or other trusted individuals to the role of estate administration. Others may consider appointing institutions or neutral third parties. These representatives are called executors, executrixes, administrators when a Will is involved or when a trust is used the parties in control over the estate are called trustees.
Representatives have legal duties of confidence or trust (fiduciary duties) to act in accordance with the deceased person’s wishes and local State and Federal laws. While most estate representatives act prudently, that does not always happen. Representatives sometimes behave inappropriately with decisions that are made regarding estate matters. On the other hand, they may face false allegations of breach of fiduciary duty. You will need to act fast with any estate litigation matters, as there are strict statute of limitations on certain areas, such as wills and trusts. If you wait too long to investigate a breach of fiduciary duties, you could lose the inheritance that is rightfully yours. The sooner you obtain legal counsel and guidance from a qualified estate elder law attorney, the more secure your inheritance will be. The attorneys at the Steburg Law Firm are not only trained in handling simple Breach of Fiduciary Duties, estate, will and probate matters, we take care of complex Breach of Fiduciary Duties litigation, living trust estate litigation and breach of fiduciary litigation.
At the Steburg Law Firm, we represent many clients in matters related to breaches of fiduciary duty. Each situation is different. We tailor our approach to our clients’ situations, often to protect our clients’ rights as beneficiaries. We also represent fiduciaries when they are accused (often without good cause) of breaches of fiduciary duty.
What Is a Fiduciary Duty?
Trustees or other representatives owe fiduciary duties to a trust or estate’s beneficiaries and are obligated to carry out those duties according to the terms of the will or trust and to act with the highest degrees of fidelity and utmost good faith. The fiduciary also must manage the trust assets capably and address any issues that arise.
When investigating a breach of Fiduciary Duties and responsibilities the three most important and traditional duties that a fiduciary must uphold are care, impartiality, and loyalty. Although not an exclusive list; it is imperative that the fiduciary acts properly.
- Duty of care: This duty is considered to be the most basic duty. It requires a fiduciary to carefully manage trust or estate assets in accordance with the estate documents, and federal, local and state laws. The entrusted assets must be cared for in a manner that will benefit all parties of the estate.
- Duty of impartiality: This duty requires a fiduciary to treat all beneficiaries equally, not favoring one beneficiary over another. A fiduciary must make fair decisions regarding the estate in a fair and proper manner.
- Duty of loyalty: This duty requires a fiduciary to act solely in the interest of the beneficiaries and not in the interest of the fiduciary. A fiduciary must remain impartial over the affairs of the estate and the assets of the estate even if the fiduciary is also a beneficiary.
Remedies: Compensation to Beneficiaries Affected By the Breach of Fiduciary Duty
We can help seek compensation on the behalf of an estate and trust beneficiaries who have suffered losses or have been negatively affected by breaches of fiduciary duty. A court can impose several remedies for breach of fiduciary duty, depending on the nature of the conduct, the financial impact on a beneficiary, and other factors affecting the estate.
Monetary remedies include what is called a surcharge. The imposition of a surcharge by the court requires a fiduciary to pay monies to the beneficiaries of the trust or estate. The court may also deny the fiduciary the right to receive fees or to pay attorney fees from estate assets. Where beneficiaries prove a breach of fiduciary duty, a court or jury is authorized to award punitive damages against a fiduciary. If punitive damages are awarded, a court or jury can take into consideration the amount of compensatory damages, fees, and costs incurred by beneficiaries along with the assets and income of the fiduciary. As part of the resolution beneficiaries may also seek removal of the fiduciary as executor, executrix, trustee or administrator.
Breach of Fiduciary Duty
People in a position of trust or fiduciary relationship, such as in wills and living trusts, officers, directors, high-level employees of a corporation or business, agents and brokers, owe certain duties to their principals or employers. Fiduciary relationships, which are by their very nature relationships of good faith, may involve a variety of obligations depending on the exact circumstances.
Fiduciary duties require that the fiduciary acts solely in the best interest of the beneficiaries and estate. Any self-dealings, conflicts of interest, or other abuse of the estate for personal advantage is a means for discipline of a fiduciary. Thus, fiduciaries are barred from using corporate property or assets for their personal pursuits, or taking corporate opportunities for themselves. More traditional fraudulent conduct, such as thefts, acceptance of secret commissions, and conflicts of interest also violate the Fiduciary Duties and responsibilities of loyalty, and may be prosecuted as such in addition to or instead of the underlying offence.
A breach of fiduciary duty is often easier to prove than fraud. The claimant does not need to prove criminal or fraudulent intent or the other elements of fraud. To prevail, the claimant must show only that the defendant occupied a position of trust or fiduciary relationship as described above and that the defendant breached that duty to benefit themselves personally.
A breach of fiduciary duty claim is a civil action. The claimant may receive damages for lost profits and recover profits that the disloyal fiduciary earned. In some instances, it may even be possible to recover the income paid to the fiduciary or agent during the period that the fiduciary was in breach of his duties. The claimant may recover profits earned by fiduciary even if the claimant did not suffer an actual loss.
When Trustees Waste or Steal Trust Assets
A Trustee over an estate, by legal definition, is obligated to use their best reasonable effort to meet the terms of the trust, or of the deceased, as stated in the will or trust documents. Trustee(s) manage the dispersal of property to beneficiaries, handle funeral expenses and creditors, and will generally ensure that the will is properly filed and pursued in probate, and takes care of other general duties related to a final accounting of the estate. Generally speaking, trustees manage assets in trust for the beneficiaries of the estate.
Possible Breach of Fiduciary Duty by a Trustee
The acts of the trustee, because they are generally open to examination by interested parties, are specifically subject to scrutiny by beneficiaries and other parties involved in an estate. Allegations that the trustee is not performing their duties are made by the filing of an objection in court.
Specific grounds must be more substantial than merely making mistakes. A trustee who is not meeting legal requirements, who is not acting impartially or using reasonable judgment, or who is willfully ignoring the law, such as in the act of self-dealing (stealing, modifying terms, wasting money, or otherwise acting inappropriately) may be sued for breach of fiduciary duties and responsibilities.
Should a trustee be held in breach, there are a number of specific civil consequences they may face, along with special damages. Constructive fraud, a tort of deliberate omission or alteration of facts, often in order to benefit self or someone else, is just one example of a serious breach of fiduciary duty, and may lead to fines and repayment to beneficiaries. Though extreme, courts can even remove a trustee for such a breach.
Reporting a Breach
A person does not have to be a beneficiary to complain about a trustee to investigative agencies (beyond a court). Many people become aware of financial abuse occurring to a frail or infirm person. In fact, some complaints by a beneficiary may be seen as nothing more than nuisance and annoyance. Wrongfully bringing complaints against a trustee who is simply refusing to give in to a beneficiary’s demands can result in the court assessing court costs and attorney’s fees against the wrongfully complaining beneficiary.
It can also occur that an attorney, whether because they are incompetent or dishonest in handling an estate or trust, cannot be trusted to correct their actions. Complaints to state bar associations, while usually effective, are not always timely enough to prevent harm. If the allegations of harm are to protect a senior or disabled individual, every state has mechanism for complaints to special departments of human services.
Documenting a Breach of Fiduciary Duty
The more information you can provide documenting the possible breach, obviously, the better. If the lawyer or advisor to whom you speak, after requesting an accounting of the trust from the trustee and examining the actions of the trustee, agrees that there is a pattern of suspicious activity taking place by the trustee, the next step may be filing a court complaint, at which point with the help of your lawyer you will have the opportunity to present your case to the court and tell the court why the trustee is in breach of fiduciary duty. If the court agrees, the trustee may be held accountable and may be liable for any losses to the trust or for any misappropriated income or assets.
All told, the investigation into breach of fiduciary duty by the trustee may include an independent review of the actions taken by the trustee, an accounting of how assets are being spent and managed, and even review by expert forensic accountants to identify possible fraud.
We are dedicated to your success, so contact us today. Speak with one of our knowledgeable elder law attorneys today at 408-573-1122 to schedule your free consultation to review your specific situation and determine the best course of action.