What is a Fiduciary Duty with Regard to Trusts and Estate Planning?

There are many terms in the field of estate planning that have become ubiquitous in the field, however, their meaning is often misunderstood. Trustee, beneficiary, executor, and fiduciary are some of these terms. The personal term “fiduciary” comes from the type of duty that a fiduciary owes to a beneficiary in a trust or financial management decision. This “fiduciary duty” is generally based upon a relationship or contract between a beneficiary and a fiduciary, or trustee.

The fiduciary duty is built upon a contractual relationship whereupon the fiduciary agrees to accept responsibility for the duty to manage the beneficiaries assets in the best interest of the beneficiary. An example of a fiduciary in the field of estate planning is the relationship between the trustee and the beneficiaries of a trust. A trustee is a person or entity (often a bank or law practice) that takes legal ownership of the trust assets and manages them in a way to benefit the beneficiaries and honors the trust. This management may include investing money, purchasing or selling assets, paying taxes, and managing legal or financial issues and disputes.

Fiduciary duties related to trusts and estate planning may involve specific obligations. The fiduciary has a duty of care to diligently inform themselves of the details of the trust assets in order to exercise sound judgment to protect the interests of the beneficiaries. Furthermore, fiduciaries owe beneficiaries a duty of loyalty, which includes removing themselves from decision-making that could pose a conflict of interest. Another duty of a fiduciary is to act legally and in good faith. A fiduciary should not break the law or behave unethically when handling the beneficiaries’ assets, especially if such dealings collaterally benefit the fiduciary. Finally, a fiduciary owes beneficiaries a duty of confidentiality. The fiduciary should not release the identity or any information about beneficiaries without a mandate or good cause.

The violation of fiduciary duty, known as a breach, can form the basis for a legal dispute that may find itself in a courtroom. If a plaintiff can prove that a fiduciary duty existed (by trust documents, a contract, or by other written/oral evidence), and that the defendant breached that duty, then a claim may be actionable. The victim of a fiduciary duty breach is entitled to claim damages based upon that breach if they can prove that they were harmed by the breach and that the cause of the damages was a direct link to the breach of fiduciary duty.

Speak with an Experienced Houston Estate Planning Attorney About Your Trust Questions

Fiduciary duties exist in many contractual and even familial relationships. The reasoning behind the legally binding obligations of a fiduciary stems from a pattern of abusive, self-serving actions that have been taken in the past by those entrusted with the property of another. Texas law can protect you in the event that you are owed a fiduciary duty that has been breached. The Houston trust and estate attorneys at McCulloch Miller, PLLC are experienced in the practice of trust creation and estate planning. If court appearances are needed, our competent lawyers can get the job done for you. Call a member of our team today at (713) 903-7879.

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