You may have heard the words “fiduciary duty” long before your brother took over management of the family trust. It may surprise you to learn that while these duties apply to the trustholder of a company, they also apply to a person who holds control over the assets and property in a family trust—and if your brother is not following them to the letter, he may be guilty of breach of fiduciary duty.
What Is Fiduciary Duty?
Trustees, executors of an estate, and anyone else who is legally bound to handle another person’s finances is considered a fiduciary. When he or she accepts the responsibility of handling money matters, a fiduciary also assumes these three duties:
- Duty of Loyalty. The fiduciary agrees not use his position to for his own personal gain, increase his own family’s or friends’ wealth, nor benefit himself at the expense of the beneficiaries of the trust. He is also forbidden to enter into any contract or business dealing that could create a conflict or interest with his obligation to the beneficiaries of the trust. Simply put, the fiduciary is expected to act and conduct business in the way the trustmaker would have done or would have wanted.
- Duty of Disclosure. Trustholders must file taxes, maintain accounts, and make investments and payments on behalf of the trust. While the trustees and beneficiaries do not have to play a part in these duties, they do have a right to receive copies of all material facts and information in the trust or estate.
- Duty of Reasonable Care. Some fiduciaries may commit a breach of duty by being reckless or negligent with the assets held in trust. A breach of reasonable care occurs when a fiduciary fails to devote the level of care that a prudent person would when dealing with his own affairs. Reasonable care may be difficult to define in some cases, such as when fiduciaries make investments that beneficiaries deem too risky.
If your sibling committed a breach of fiduciary duty, you may be able to recover assets and profits earned by the disloyal agent, even if you and your family did not suffer financial loss from the transaction. Contact Craddock Law today to have us examine your case and tell you could be owed.