Thursday, July 24, 2014
A fiduciary holds a position of trust in relation to another person. A common example of a fiduciary relationship is one between an estate trustee and the beneficiaries of an estate. Because the estate trustee typically has significant discretion to manage the assets of the estate, they are in a position of trust in relation to the persons to whom the estate’s assets are to be distributed.
Thus, an estate trustee must exercise their discretion in the best interests of the beneficiaries. They must protect and earn money from estate property, and obtain investment advice towards these ends.
In the event that a fiduciary duty has been breached, courts have equitable remedies at their disposal. When exercising its discretion, a court will not only compensate the wronged party, but also seek to uphold the commitments of good faith and loyalty.
Hence, a fiduciary who has misappropriated funds may be required to pay back the sum. Where a fiduciary has engaged in self-dealing, yet subsequently paid the funds back, they may be required to pay any profit earned from the loan or interest that the sum would have accrued had it not been loaned. A court may also order a fiduciary to pay legal costs, as opposed to the funds being paid out of the estate assets, for example.
It is important fiduciaries understand their duties and obligations. They may wish to retain a lawyer to ensure they are meeting their responsibilities.
See Suzana Popovic-Montag, Do You Trust Your Fiduciary, The Huffington Post, July 22, 2014.