A fiduciary relationship can exist in several forms, including between business partners, employers and employees, fund managers and investors, corporate officers and their companies, and more. Claiming that someone breached a fiduciary duty, or being accused of breaching a fiduciary duty, is a serious allegation and can be accompanied by severe consequences.
At DeBlasio & Gower LLC, our attorneys represent clients in many fiduciary settings, including both trustees and beneficiaries involved in disputes regarding estates throughout Chicago and its surrounding communities in Illinois. To discuss your matter further, please get in touch with us at (630) 560-1123.
What Is a Fiduciary?
A fiduciary is a person or entity who has a legal obligation to act in someone else’s best interest. In the case of a trust, this arrangement consists of a trustee who is tasked with acting in the highest level of good faith or standard of care to protect the interests of the trust and its beneficiaries.
Someone in the role of a fiduciary must act in the best interest of a client or beneficiary at all times. This is true even if it involves making a decision that is contrary to the fiduciary’s own interests. In plain English, it means that a fiduciary must put your needs ahead of their own.
Responsibilities of a Fiduciary
A fiduciary is charged with the responsibility of carrying out a task with the utmost good faith. Whether that’s maximizing a corporation’s value for shareholders or managing a financial client’s retirement portfolio, when there’s a legally established fiduciary relationship, it’s considered the highest duty of the law.
When a fiduciary is charged with overseeing a trust, the duties typically include:
– Dispersing assets among stated beneficiaries
– Managing assets such as stocks, real estate, and other investments
– Maintaining honest communication
– Acting reasonably to protect the interests of the beneficiaries, ensuring their interests are a top priority
Specifically, a fiduciary has a duty of loyalty to the parties set forth in the legal agreement that established the trust. This means that the fiduciary must act solely and exclusively in the best interest of the beneficiary. If there is more than one beneficiary, each of them must be treated equally so that there is no impartiality.
In the course of the fiduciary’s duty, he must also abide by all legal guidelines.
What Constitutes a Breach of Fiduciary Duty?
A person acting as a fiduciary is required to exercise reasonable caution and act in a capacity that is consistent with their knowledge and skill. Fiduciaries are not allowed to abuse or take advantage of any of the discretionary authority with which they’ve been provided.
By way of example, a trustee may be subject to liability for breaching a fiduciary duty if the person or entity has done one or more of the following:
– Acted negligently when investing or handling assets
– Received unreasonable or excessive compensation
– Valued assets incorrectly
– Failed to distribute funds in a timely manner
– Failed to respond to inquiries or correspondence
– Took assets without prior approval
– Distributed assets to themselves or comingled estate funds or assets with their own
– Failed to document financial activities or transactions
– Concealed important information
– Shared secrets or proprietary details
– Committed an act of fraud or deceit or used undue influence
It’s important to note that intent is not necessary to breach a fiduciary duty, nor is knowledge of a potential breach. For example, a fiduciary who sells real estate valued at $1 million for $100,000 by mistake could still be held liable for breach even if there was no intent to harm the estate and the fiduciary was unaware that he was making a mistake.
Other factors that may not meet the threshold for breach include:
- A loss in the estate’s value: If the value of an estate drops in value, it might seem logical to blame the fiduciary. However, a loss in value by itself is not enough to prove a breach. There must be additional evidence that the fiduciary acted in a way that was inconsistent with the best interests of trust or its beneficiaries.
- Failure to grow the asset portfolio as expected: There are no guarantees in life about how much an asset will be worth. Market and economic factors can be unpredictable. Therefore, failure to yield a return on an asset portfolio does not constitute grounds for a breach of fiduciary claim without other circumstances.
Available Remedies for Breach of Fiduciary Duty
Violating a fiduciary duty can result in both criminal and civil consequences, including damages exposure. A victim of a fiduciary breach has many potential remedies, including, one or more of the following options:
- Remove the fiduciary from the role of trustee
- Seek reimbursement for losses and depreciation that occurred under the fiduciary’s management
- Seek compensation for profits that would have been made if the trust was managed reasonably
- Disgorge any monies taken from the trust or beneficiaries
- Recover any profits the fiduciary received while managing the trust
- Bar the fiduciary from using the trust’s money for his legal defense
- Receive punitive damages that may be awarded by the court for instances of particularly egregious behavior by the fiduciary
Contact a Breach of Fiduciary Attorney Today
Whether a trustee is an individual or entity, the trustee is obligated to comply with the responsibilities and fiduciary duties specified in a trust or under applicable law. When a trustee abuses the authority granted or acts unethically or irresponsibly, the beneficiary may take legal action to recover damages or remove the trustee. For a trustee accused of breaching a fiduciary duty, it’s also imperative to seek out legal advice.
At DeBlasio & Gower LLC, our attorneys understand the emotional and legal complexities of litigating breach of fiduciary cases in Illinois. Contact us to set up a consultation to discuss your case (630) 560-1123.