What does it mean to be a fiduciary, and what does it look like to breach fiduciary duties?
July 21, 2021
A ward’s guardian, an estate’s personal representative, and trustees of trusts are all considered fiduciaries within the guardianship, probate, and trust administration processes. Fiduciaries are held to a high ethical and legal standard. They are charged with the obligation to manage the property of the ward, or the estate, or the trust, for the best interest of the beneficiary of such property.
The Florida Supreme Court characterized the fiduciary relationship as follows:
The relation and duties involved need not be legal, they may be moral, social, domestic or personal. If a relation of trust and confidence exists between the parties, that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has been acquired and abused, that is sufficient as a predicate for relief. Quinn v. Phipps, 113 So. 419, 421 (Fla. 1927).
When a fiduciary duty has been violated or breached, fiduciaries can be exposed to lawsuits and financial liability.
A breach of fiduciary duty occurs when damages or harm are done to the principals (i.e., the ward, the beneficiaries of an estate, or the trust beneficiaries) as a result of the fiduciary failing to perform their ethical and/or legal duties. These kinds of duties vary and each set of facts are different.
One common circumstance of a fiduciary breaching their fiduciary duties is self-dealing, meaning when a trustee, guardian, or personal representative gifts, sells, rents, or otherwise uses property for their own benefit (or the benefit of their own family members). Sometimes this this is done through arms-length transactions at less than fair market values, sometimes the fiduciary is using the assets for their own personal use.
Breach of fiduciary duty can also exist if a fiduciary makes improper or poor investment decisions, which are detrimental to the principals. If this becomes part of a lawsuit, often expert testimony is needed to show the amounts of such financial losses and therefore the damages to the principals.
Another example of a breach is when trustees, guardians, or personal representatives over-pay themselves. While permitted a fee for expenses and services, excessive reimbursement can be considered a breach; in guardianship cases a guardian’s fee is reviewed by the guardianship court, but in an instance of an estate or a trust, often the fees are not disclosed until the time of an accounting provided to the beneficiaries.
When it comes to assets of another, the fiduciary must be very careful to avoid exposure to liability. It is best to consult with your trusted probate and trust lawyer on any instance where you are serving as a fiduciary.