When someone appoints an executor or trustee, this signals tremendous confidence in their ability and integrity. However, sometimes an executor or trustee is not suitable for this position, or does not fully understand his/her/their responsibilities. When a person does not fulfill their obligations as a trustee or executor, this is considered a breach of fiduciary duty, and contacting a premier trust attorney is crucial to preserving the estate or trust. Here is what to know about the penalty for breaching this duty:
What is Fiduciary Duty?
A trustee or executor has significant responsibility when overseeing a trust and must maintain the highest standard of care when they have this position. This duty begins the moment someone accepts the responsibility of being a trustee or executor.
The trustee or executor must execute the wishes of the person who created the estate planning instrument per the document, whether it is a trust or will, and make decisions for the benefit of the trust. Essentially, you can define fiduciary duty as a legal obligation to:
- Administer the trust or estate per the estate planning instrument
- Prioritize beneficiary interests over their own
- Maintain reasonable control over and preserve a trust or estate’s property
- Always act in good faith and with integrity and loyalty to the trust
- Treat beneficiaries with impartiality and respect
- Maintain transparency about all relevant information
When a trustee or executor fails to abide by these responsibilities, it is considered a breach of fiduciary duty, and consulting an expert trust attorney is imperative to preserve the integrity of the trust or estate.
What Constitutes a Breach of Fiduciary Duty?
A trustee or executor breaches this duty when they knowingly breach their responsibilities, are unaware of their duties, or cannot perform them.
If a trustee or executor breaches their duties, there is a risk of criminal actions and/or significant financial liability. Working with a preeminent trust attorney is essential. Several situations constitute a breach of duty. Some examples include:
- Uses the trust or estate’s property for their benefit or financial gain
- Requires beneficiaries to waive the fiduciary’s liability
- Operates with a conflict of interest
- Fails to fulfill their duties and obligations
- Does not administer the trust or estate per the instrument
- Engages in activities that endanger the trust or estate
- Fails to disclose pertinent information to beneficiaries
Still, there are innumerable situations that the courts consider a breach, and only an expert trust lawyer can help you determine how to prove a breach of duty and your legal recourse.
What are the Consequences of a Breach of Fiduciary Duty?
The most common penalty for a breach of fiduciary duty involves suspending or completely removing the trustee or executor, having them pay attorney fees and court costs, and having them return any stolen property.
However, there can be more extensive and severe consequences. Depending on the situation, a trustee or executor may be liable to pay compensatory damages, which means reimbursing the estate, trust, or beneficiary for money they lost as a result of a breach.
If the situation is more severe, a trustee or executor may also have to pay punitive damages on top of the compensatory damages. Moreover, if a trustee or executor perpetrates theft, fraud, or embezzlement, they could even be charged with a crime and go to jail.
In California, breaching this duty via theft or embezzlement is a misdemeanor crime when the value of stolen assets is $950 or less, and it is punishable by up to 6 months in county jail. If the value exceeds $950, this is a felony and can result in up to 3 years in jail.
Contact a Premier Trust Attorney if You Suspect a Breach of Fiduciary Duty
A trustee and executor have considerable influence over a trust and estate. When they neglect or breach their duties, this has severe consequences. Whether you are a trustee or executor accused of breaching your fiduciary duty or believe a trustee or executor has breached their obligations, consulting with an expert estate litigation attorney is essential to preserve the integrity of an estate or trust.