Fiduciary duties are legally imposed standards to which fiduciaries must adhere. The range of standards is wide and can be specified depending on the type of fiduciary relationship that exists between a representative and his representee. However, these standards can typically be broken into one of two categories: the duty of care and the fiduciary duty of loyalty.
What is the Fiduciary Duty of Loyalty?
The fiduciary duty of loyalty, in its simplest form, obligates a fiduciary to eschew self-dealing practices and act in the best interests of those they serve. There are many ways a trustee, executor, or estate administrator can breach their duty of loyalty.
In the case of an estate executor, the fiduciary duty of loyalty is the legal obligation of the executor to act in good faith and to avoid a conflict of interests. In the business world, the fiduciary duty of loyalty refers to the responsibility that partners or joint venturers have to work for the common goal of the venture and avoid self-dealing in matters pertaining to the venture. Although a breach of these duties can take various forms, all are covered by fiduciary law.
Self-Dealing: Directly stealing funds is an obvious breach of fiduciary duty, but stealing can take many forms. Between an executor and a beneficiary, self-dealing occurs when an executor charges excessively high fees, or fails to document all assets. A trustee breaches this duty when he receives a “kick-back” for investing trust funds in certain assets.
A partner or joint venturer may breach his duty of loyalty by using company property for his own interests. He might also steal business opportunities or fail to share profits from the business venture.
Conflict of Interests: Fiduciaries are prohibited from acting to benefit themselves over those they serve as fiduciary. For example, an executor cannot delay transferring assets to a beneficiary in order to increase the fees he will receive.. A trustee cannot make a loan to himself from trust assets. Partners cannot compete with the partnership for clients.
What is the Difference Between Fiduciary Duty of Loyalty and Duty of Care?
The fiduciary duty of loyalty and the fiduciary duty of care both require that fiduciaries act in the best interests of those they represent. While the fiduciary duty of loyalty compels involved parties to avoid self-interested acts, the fiduciary duty of care requires that involved parties must generally act in good faith and with the same skill and diligence they would use if they were acting on their own behalf. These duties compel fiduciaries to act with integrity.
An executor might breach fiduciary duty of care by failing to search diligently for beneficiaries, or by failing to administer the estate in a timely manner. Gross negligence by a partner in a business can also be a breach of the duty of care.
What if a Fiduciary Breaches their Duty of Loyalty?
If you suspect that your fiduciary has breached his duty of loyalty, you have several options. You may want to pursue alternative dispute resolution before filing a lawsuit against the fiduciary. Alternative dispute resolution may involve a neutral mediator who tries to help the parties reach a settlement. It may also involve a neutral arbitrator who acts as a judge and resolves the case outside of court. These methods can save both parties time, money, and hurt feelings.
If alternative dispute resolution is not a viable option, you may choose to file a lawsuit against the fiduciary. In either case, you will want to hire a good lawyer who is experienced in fiduciary law.
We Can Help in the Event of a Breach of Fiduciary Duty
If you feel that your executor is not completing their duties in your best interest, or that your business partner is self-dealing, there are lawyers who can help you. Gaslowitz Frankel LLC aids in both alternative dispute resolution and litigation. When you contact our law office at 404.892.9797, you’ll be in touch with the premier fiduciary litigators for the state of Georgia.
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Gaslowitz Frankel LLC is the Southeast’s premier fiduciary litigation law firm. Our legal team specializes in all aspects of fiduciary disputes with over 30 years of experience representing individuals, executors, trustees, and more in complex fiduciary disputes involving wills, estates, and trusts.
