In estate planning and estate administration matters, the term fiduciary duty is used often. This is because the person who is designated to carry out the terms of a will or trust has an important responsibility.
Fiduciary duty for wills and trusts
In a will, the executor is the person who settles the probate estate, pays the deceased person’s creditors, collects and distributes his or her property to the will beneficiaries and pays any outstanding taxes. In a trust, the trustee is responsible for managing the person’s money or assets.
Executors and trustees have a fiduciary duty to the person who created the will or trust, called the grantor. This means that they must act in the grantor’s best interests, not their own. They must follow the terms of the will or trust and follow the grantor’s directions about how the assets are managed.
They cannot co-mingle the grantor’s assets with their own, use the grantor’s assets for their own benefit, cannot prefer one beneficiary over another and must keep correct records, including filing accurate tax returns and providing truthful information to the beneficiaries.
Breach of fiduciary duty
There are common examples of when a trustee or executor breaches his or her fiduciary duty. It can occur when he or she sells the grantor’s property and keeps the proceeds instead of including them in the estate, fails to properly administer the estate, does not inform the beneficiaries of assets they are entitled to or does not follow the instructions in the estate plan.
It’s important that estate planning and administration are completed correctly to ensure the grantor’s wishes are carried out. An experienced attorney can offer guidance.