Estate and trust administration may require months or years of concerted effort. The person creating an estate plan or funding a trust typically selects someone to manage administrative matters. A trustee helps administer a trust, while a personal representative or executor oversees estate administration.
Some people refer to trustees and personal representatives as fiduciaries. This term references their fiduciary duty to beneficiaries. They have a legal obligation to put the best interests of beneficiaries ahead of their own wishes. Most trustees and personal representatives do everything in their power to uphold their fiduciary duty while fulfilling their administrative responsibilities. Others might violate their fiduciary duty. Beneficiaries may then need to take legal action to replace them or hold them accountable for the impact of their conduct.
What are the most common ways in which fiduciaries fail to uphold their duty?
Self-dealing
Managing trust or estate resources may require the services of professionals. For example, the fiduciary may require support maintaining real property holdings or managing financial investments. Self-dealing occurs when they outsource those obligations to a company that they work for or own. They might also hire a business that has a connection to a friend or family member in the hopes of securing a kickback. Self-dealing typically involves agreeing to pay far more than is necessary for services from a business or professional at the expense of the estate or trust.
Embezzlement
Some fiduciaries cannot overcome the temptation that stems from having access to high-value property and financial resources. They misappropriate assets intended for beneficiaries for their own enrichment. Embezzlement might involve the theft of physical assets, including jewelry or antiques. It could also involve the diversion of funds from estate or trust accounts for personal use.
Incompetence
Many people do not intentionally breach their fiduciary duty. Instead, they allow procrastination, disorganization or lack of knowledge to negatively affect the estate or trust. They fail to take necessary steps to secure and properly manage resources. They make decisions that directly diminish the value of the estate. Incompetence during trust or estate administration can lead to allegations that a fiduciary breached their duty to beneficiaries.
Beneficiaries and others who have evidence of inappropriate conduct may need to consider probate litigation to address the issue. Removing a fiduciary and replacing them with someone else can potentially help to preserve the resources in an estate or a trust.