In Fiduciary We Trust, But Should We?

July 24, 2019 in Uncategorized | MARTIN WREN, P.C. | LEAVE A COMMENT

 Estate Planning Lawyer

When planning your estate, you may have one or more fiduciaries: a person or institution that can act on your behalf. The fiduciary may serve in any number of roles, such as accountants, attorneys, bankers, business advisers, financial advisers, mortgage brokers, and real estate agents. They have a legal obligation to serve your best interests and provide good advice. In estate planning, the fiduciary must carry out your last wishes as specified in your last will and testament.

What Does a Fiduciary Do?

Per the Securities and Exchange Commission, there are five responsibilities of a fiduciary:

  1. Put the client’s interests first.
  2. Act with the utmost good faith.
  3. Provide full and fair disclosure of all material facts.
  4. Do not mislead clients.
  5. Expose all conflicts of interest.

Who Can Be a Fiduciary?

There are several fiduciary relationships:

  • Attorney and client
  • Broker and principal
  • Principal and agent
  • Trustee and beneficiary
  • Executors or administrators and the heirs of a decedent’s estate

In estate planning, you can name a spouse as fiduciary in all matters, including guardianship for minor children.

What Happens if the Fiduciary Isn’t Trustworthy?

When a fiduciary acts in a manner that is in their own interest at the expense of the principal, that is Breach of Fiduciary Duty. To win a complaint about breach of fiduciary duty, the complainant must prove they have received damages and that the fiduciary failed in the duties to put the principal or plaintiff’s interests ahead of their own by withholding pertinent information, by misappropriating funds, abusing their position of influence, failing in their responsibilities or misrepresenting the statement of fact. It is therefore critical to keep detailed records of all communications.

Penalties may include:

  1. Compensatory damages. These are payments to compensate the victim for losses suffered as a result of the breach. For instance, if a director of a company makes poor decisions causing significant losses, the shareholders may file suit. They will need to prove exactly how the director breached their fiduciary duty and what was the total of the resulting loss.
  2. Punitive Damages. This is meant to punish the defendant for their actions. This is to act as a deterrent for future similar acts by the defendant and anyone else who may try to act in a similar way. Punitive damages usually require proof of malice or fraud.
  3. Professional consequences. The prior two penalties are financial in nature. This one affects the defendant’s career and ability to do their job in the future. In the example of an attorney, they could face malpractice, which could result in disbarment. Others could lose professional accreditation, preventing them from practicing in their chosen profession permanently.

If you feel that you have suffered a loss due to a breach of fiduciary duty, contact a licensed estate lawyer in Sacramento for help understanding your rights.



Thanks to the Yee Law Group for their insight into estate planning and fiduciary.

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