When a person creates an estate plan, they choose people to make decisions for them and handle their affairs when they no longer can. Typically, these involve an executor, a trustee and sometimes a guardian. Under the law, these individuals are called fiduciaries and have a legal duty to protect the interests of the person who appointed them, their assets and beneficiaries.
Breaches of fiduciary duty
As with everything in life, sometimes things do not go as planned, and people do something against the law. For example, in this context, an executor could take assets from the person’s estate and use those assets for themselves instead of protecting them and keeping them safe for the intended beneficiaries.
When a fiduciary fails to act legally, there is a breach of fiduciary duty. There are many ways of breaching that duty, including:
- Self-dealing
- Mismanagement of assets
- Failure to disclose material information
- Misusing confidential information
- Acting in their best interests when they should act in the best interests of the person they owe a duty to
These examples are breaches of fiduciary duty, and there are many more. Essentially, it is when the person someone trusts to take care of their estate and follow their wishes violates that trust and does something they should not do.
When a breach occurs, the harmed person can file a lawsuit seeking damages. In many cases, breaches of duty can be catastrophic because they can cause financial loss to a beneficiary. In cases where a fiduciary takes money from an estate, for example, reserved for a particular beneficiary, the court can mandate the fiduciary to return the funds they took, fine them and sanction them in other ways. The court can also remove them from the position of fiduciary.
Safeguarding assets and interests
When choosing a person to manage your estate, ensure that you know the person well and trust them to follow through with what they committed to doing. Even though the law provides the right to sue them for their breach, it is always better to prevent it if possible.