Fiduciaries - Duties of Fiduciaries
Duties of Fiduciaries
When taking control of another's affairs, fiduciaries agree to manage those affairs in accordance with the wishes of the individual(s) who established the fiduciary relationship.
Fiduciaries are primarily responsible for two main duties: a) a duty of loyalty and b) a duty of care. The duty of loyalty requires that fiduciaries act in the best interest of the other person(s) involved, rather than in their own. Fiduciaries must not derive any direct or indirect profit from their position, and must avoid potential conflicts of interest. The duty of care requires that fiduciaries perform their functions with a high level of competence and diligence, in accordance with industry standards.
Breach of Fiduciary Duties
A breach of fiduciary duties occurs when a conflict of interest has caused the fiduciary to lose sight of the duty required to properly carry out the defined responsibilities.
Heirs and beneficiaries, as well as wards, should be concerned about the possibility that there has been a breach of the fiduciary duty owed to them if they:
- Suspect that the trustee, guardian or executor may be self-dealing in some way. Examples might include selling or renting property to friends or family members at a bargain rate; taking assets (cars, computers or boats) for personal use, etc.
- Think that the trustee, guardian or executor is paying themselves too much. While each of these fiduciaries is legally allowed to receive payment for their efforts as well as reimbursement for their legitimate expenses, these amounts should be reasonable. Excessive compensation is a breach of fiduciary duty.
- Believe that the trustee, guardian or executor is making poor or improper investment choices.
- Fear that the trustee, guardian or executor may be intentionally pilfering or stealing assets.
The primary defense in a breach of fiduciary duty situation is to demonstrate that the fiduciary's actions are within the bounds of the foundational documents (will, trust, etc.) as well as state law. For example, what the beneficiaries might argue are "improper investments" a judge may understand to be prudent, risk-averse investing decisions.Sample Questions 1 - 3