When you act in a fiduciary capacity, this means that you act on someone else’s behalf. The people for whom you’re working trusts you to make decisions and take actions that are in their best interest, never your own. In other words, you have a moral, ethical, and legal obligation to act responsibly.
Your experience as a fiduciary likely will come about if someone appoints you as the trustee of a trust that he or she establishes or names you as the executor of his or her will, leading to you becoming the personal representative of his or her probate estate when he or she dies. In the first instance, you will be working on behalf of the trust itself and its beneficiaries. In the second, you will be working on behalf of the estate itself and its heirs. Discussing these matters with an elder law lawyer may help you out with this role.
In both instances, you will have an underlying document, i.e., the trust document or the deceased’s will, that will tell you how to ultimately distribute the assets. Until then, however, your fiduciary duties may well include some or all of the following:
- Managing the assets to the best of your ability
- Making investment decisions
- Making buying and selling decisions
- Filing all appropriate tax returns
- Preserving the value of the trust or estate to the best of your ability
- Keeping the beneficiaries or heirs informed
Mistakes Versus Breaches
No one expects you to be unfailingly perfect in carrying out your fiduciary duties. You are, after all, subject to making inadvertent mistakes that all human beings make. For instance, you might make a calculation error on a tax return or other report. While unfortunate, this is not an actual breach of your duties for which the beneficiaries or heirs can sue you.
The same applies if, for instance, a stock in which you invested on behalf of the trust or estate doesn’t perform as well as expected. If you did your due diligence before making the investment, no one can sue you for breach of your fiduciary duty because the stock failed to live up to its expectations.
An actual breach means you knowingly did something detrimental to the trust and its beneficiaries or the estate and its heirs. Examples of fiduciary breaches include the following:
- Failing to timely file a tax return
- Putting your own interests ahead of the beneficiaries or heirs
- Giving one or more beneficiaries or heirs preferential treatment
- Misleading the beneficiaries or heirs
Whether you’re a trustee or an estate’s personal representative, you have the right to hire an experienced elder law lawyer to help you fulfill your fiduciary duties. In most situations, the trust or estate will pay his or her legal fees.