Breaches of fiduciary duty and fiduciary abuses unfortunately are more common than you might think, especially in cases involving the elderly and the infirm. Fiduciaries are often granted broad powers over estate funds and assets, and may take advantage of their trusted position for personal profit or gain. If you suspect that you or a loved one are a victim of a fiduciary breach or abuse, or you’re concerned you may be accused of the same, read more.
What is the meaning of fiduciary?
A fiduciary is someone who is legally obligated to place the interests of another above their own. A fiduciary is usually in charge of managing assets or other interests on behalf of another person or group of people. There are many types of fiduciary relationships — an attorney is a fiduciary for his or her client, for example, spouses owe each other fiduciary duties, as do partners in a business. One of the most common and well-known fiduciary relationships is that between a trustee and a beneficiary or between an executor/administrator and a beneficiary..
As a fiduciary, a trustee or executor/administrator is legally obligated to base all of their decisions on what is best for the beneficiaries — even (and especially) when it is in conflict with what is best for themselves. The fiduciary designation represents the highest legal duty one party can owe another. The law recognizes that, with great power, comes great responsibility. As a fiduciary, a trustee or executor has a duty to:
- Treat beneficiaries with care and respect
- Act reasonably and fairly
- Be honest, open and transparent about all potentially relevant information
- Act in good faith at all times
- Put the beneficiary’s interests first
A trustee, executor, or power of attorney agent must never engage in self-serving activities or fail to disclose conflicts of interest. Fiduciaries also must account for, justify, and document their actions taken with regard to the assets and interests they manage. The first priority of any financial fiduciary has to be benefiting their beneficiaries, and they must always remain above reproach in this regard.
What constitutes a breach of fiduciary duty?
A breach of fiduciary duty occurs when a fiduciary acts unreasonably, in a manner that does not mean the standard of what a reasonable fiduciary should do in the same situation, all things considered. A breach can arise from a failure to make assets profitable, also known as waste, or from failing to avoid conflicts of interest, including their own conflicts
A fiduciary has been entrusted with funds, assets, and personal information — as well as the authority to make final decisions about how such resources are handled. Thus, the decisions made by fiduciaries will naturally have an impact on the parties they represent.
If a trustee, executor, or power of attorney agent is failing to properly manage assets, leveraging resources for their own benefit, or their actions seem to be in any way motivated by personal gain or for the gain of anyone other than the beneficiaries, a breach of fiduciary duty should be suspected.
In such a case, you should contact an estate litigation attorney as soon as possible, to prevent further harm, loss, or mishandling of funds. You should likewise contact an attorney if you are a trustee, executor, or power-of-attorney accused of abusing your fiduciary duties. You will need professional guidance to demonstrate that your actions were reasonable and justified under the circumstances.
What is fiduciary abuse?
Fiduciary abuse occurs when one person has been legally entrusted with managing the assets or interests of another, and uses their authority in an illegal or unethical manner for personal gain. Fiduciary abuse can occur in many different contexts, by many different types of perpetrators — trustees, executors, agents, financial advisors, caretakers, etc. It is not uncommon for family members who also are acting in these capacities to commit fiduciary abuse.
Any time an individual is placed in a position of power over someone else’s assets or interests, there is a risk that they will abuse that power. If you suspect that a family member in a fiduciary role is concealing information, commingling funds, misappropriating funds, or acquiring funds by coercion, deception, or theft, contact a fiduciary abuse attorney right away to protect your inheritance while it lasts. We at RMO have a wealth of experience dealing with all kinds of fiduciary abuse cases, and can help you decide how best to proceed whether you are a plaintiff or defendant.
What does fiduciary abuse not include?
In some cases, a will, trust document, or power-of-attorney grants a fiduciary relatively broad powers to use their own judgment on a wide variety of matters. When a fiduciary is empowered to use discretion in this way, it becomes harder to prove that they have crossed a legal or ethical line. In other words, just because the beneficiaries don’t like a fiduciary’s decision doesn’t mean the fiduciary has committed abuse or there is a fiduciary breach.
If, for example, a trust document grants the trustee the power to decide whether to distribute or reinvest dividends, the trustee is within his rights to reinvest, even though the beneficiaries may pressure him to distribute the dividends instead. Unless other facts exist, this is probably not a case of fiduciary breach or abuse.
But every case is different, and there are exceptions to every rule, which is why you should always seek a legal consultation with an experienced trust litigation attorney. If, for example, the trustee above were an officer of the company he is reinvesting the dividends in, there may be a conflict of interest that would highlight a fiduciary breach or abuse claim.
What are the elements of a breach of fiduciary duty?
To win a breach of fiduciary duty in California, the plaintiff need only prove:
- That a fiduciary relationship actually existed
- That the fiduciary breached their fiduciary duties
- That the breach resulted in damages to the plaintiff
The plaintiff has a relatively low burden of proof in these cases, assuming a breach or abuse did actually occur. And so it is important to emphasize again to those serving as a trustee, executor, or agent — always act in the best interest of those whose interests you represent. You should have a reasonable, sound, and documented basis for the decisions you make and the actions you take in the course of discharging your fiduciary duties.
What are some breach of fiduciary duty examples?
Examples of breach of fiduciary duty may include:
- When a trustee/executor embezzles estate funds
- When a trustee/executor commingles estate funds with personal funds
- When a trustee/executor does not comply with their contractual obligations
- When a trustee/executor causes loss or harm through a wrongful act
- When a trustee/executor causes loss or harm through a wrongful omission
- When a trustee/executor acquires funds through fraud, deceit, or undue influence
Note that some examples of breach of fiduciary duty also qualify as criminal offenses. However, a plaintiff may opt to forego criminal charges and resolve the issue in a civil suit for monetary or punitive damages, and/or injunctive relief. In layman’s terms, this means that the victimized party may be entitled to financial compensation directly related to the fiduciary’s breach, additional financial compensation for damages resulting therefrom, and in all likelihood, the offending fiduciary being removed from their position by a judge.
Is fiduciary abuse the same as power of attorney abuse?
Power of Attorney abuse is a sub-type of fiduciary abuse. A power of attorney is a legal document that appoints an agent to act on behalf of another person, usually when that person is incapacitated and cannot make decisions for themselves. The agent in a power of attorney holds a massive amount of power. They are entrusted with handling everything from major medical decisions to finances and real estate. When designating an agent in a power of attorney it is extremely important to appoint someone you would trust with your life, because they may very well hold it in their hands at some point.
But even when an agent is a trusted family member or friend, they may abuse their fiduciary role for self-serving reasons. We have seen countless cases where life savings are wiped out, would-be inheritances are squandered, and families are otherwise torn apart by the covert activities of an unscrupulous agent. Such abuses run rampant. If you suspect power of attorney abuse, you need to act now rather than later, before it is too late to recover lost assets.
Is fiduciary abuse the same as financial elder abuse?
Financial elder abuse can be — but is not always — a type of fiduciary abuse. If the offender served as a fiduciary to the elderly victim, they may be committing financial elder abuse as well as fiduciary abuse. It is an unfortunate reality that trust family members, advisors, and caregivers are the most frequent abusers who prey upon the elderly via fraud schemes or deceptive tactics.
Elderly people are often physically or mentally incapacitated, easily confused, and dependent upon others to manage their lives and their assets. This makes them prime targets for fraud, coercion, forgery, theft, identity theft, and all manner of deceitful misdeeds. A fiduciary for an elderly person is therefore in a heightened position of responsibility, because the person they are acting on behalf of may lack the ability to advocate for — or even understand — their own interests.
Examples of financial elder abuse abound. Caretakers may cash a social security check and spend it on themselves instead of the recipient. Family members or financial advisors may pressure a patient with early Alzheimer’s to sign major financial documents they are incapable of comprehending. A power-of-attorney agent for a dementia patient may use his mother’s bank account as an unlimited resource, thinking none will be the wiser.
These types of offenses are all too common, and California law does not look kindly upon them. If you believe that someone is committing elderly financial abuse against a loved one, contact an elder abuse attorney as soon as possible. You may also have a fiduciary abuse or breach of fiduciary duty claim.
Is there a statute of limitations on breach of fiduciary duty?
Yes. But it depends upon your claim and the current status of your fiduciary relationship. Generally speaking, the statute of limitations on fiduciary abuse may be as long as only 3 or 4 years in California. This is why it is important to contact an attorney in a timely fashion if you suspect that a fiduciary has acted in bad faith.
What is the penalty for breach of fiduciary duty?
The most common penalties for a breach of fiduciary duty are compensatory damages, punitive damages, double or treble damages, fees, costs, and removal of the fiduciary. Compensatory damages are meant to make the plaintiff “whole” — that is, to pay the plaintiff back for the amount lost as a direct result of the fiduciary breach. Punitive damages are intended to punish the guilty party by making them pay an additional sum over and above the amount lost due to their wrongdoing. Double and treble damages are statutory remedies that will act to double or triple the amount of compensatory damages recovered under specific laws. Fees and costs are reimbursement of attorney’s fees, expert witness fees, and other costs associated with bringing the fiduciary to justice and may be available under various theories. In addition to having to pay financial restitution, the offending fiduciary will usually be ousted from their post — a professional may lose their license; an agent may lose their power of attorney; a trustee or executor may be replaced by another party, etc.
Some fiduciary abuses, such as fraud or embezzlement, carry criminal penalties as well. But most prosecuting authorities do not have the time or resources to pursue these issues and instead leave them to be decided in civil, rather than criminal, court.
When should I contact a breach of fiduciary duty lawyer?
Contact a breach of fiduciary duty lawyer the moment you suspect that someone in position of trust and authority is abusing their power over another’s assets. The longer you wait, the more likely it is that key evidence may be lost and more harm will be done.
Do I need a breach of fiduciary duty lawyer near me?
We recommend finding an experienced breach of fiduciary duty lawyer familiar with the civil court in the county where the abuse or breach occurred. For example, if an offending trustee lives in Miami, Florida, yet the trust was executed in Los Angeles, California, we recommend working with a trust litigation attorney in Los Angeles. A Los Angeles probate lawyer will generally be more familiar with the Los Angeles Superior Court Probate Division, versus an out of state attorney.
Have questions? Contact us any time.
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About RMO Lawyers, LLP
RMO LLP provides personal and efficient inheritance dispute services to individual and institutional clients. The firm’s attorneys focus on probate litigation involving contested trust, estate, probate, and conservatorship matters. Serving California and Texas, with offices in Los Angeles, Pasadena, Orange County, San Diego, Fresno, the Bay Area, Dallas, and Houston. For more information, please visit https://rmolawyers.com/.