Troubleshooting Legal Problems

What constitutes a breach of fiduciary duty in estate planning?

Individuals who play a role in estate planning, including trustees, executors and others, have a legal obligation to always act in the best interests of the estate, trust, heirs or beneficiaries. The breach of this legal obligation is a breach of fiduciary duty.

Fiduciary duties can include managing an estate, distributing assets, following the estate creator/grantor’s instructions and serving the parties they owe an obligation to with the highest possible ethical standards.

Examples of breaches of fiduciary duty

There are many ways to breach a fiduciary duty, which is a legal violation imposed on the fiduciary. For example:

  • Stealing or committing fraud
  • Conflicts of interest
  • Colluding with beneficiaries
  • Disloyalty
  • Misusing funds or assets
  • Favoring a beneficiary over another beneficiary
  • Using poor judgment
  • Assigning estate property to themselves

These examples constitute a breach of fiduciary duty. The beneficiaries can bring a claim against the fiduciary to remove and replace them from that position.

In addition, the law allows them to hold the fiduciary liable for financial losses or damages. Among those damages, beneficiaries and heirs can seek:

  • Removal of the trustee or executor
  • Limiting or stopping the actions of the trustee or executor
  • Monetary damages
  • Transfer of property

Fiduciaries must understand their legal obligations and duties before agreeing to serve in that capacity. It is an important role that must be taken seriously.

It is equally vital for grantors, beneficiaries, heirs and anyone else involved in estate plans to understand a fiduciary’s duties, what obligations a fiduciary must meet, and the legal recourse they have against the fiduciary in case of a breach.