A fiduciary is one entrusted with another person's assets or to provide trusted advice regarding assets. Many duties befall the fiduciary, especially in the case of estate planning and probate litigation.
Primary fiduciary responsibilities
1. Loyalty to the client: The fiduciary must both act in the best interest of the client and subordinate his own interests. If the fiduciary always acts in the best interest of the client, his reward will be commensurate with his well-performed duties.
2. Conflict, confidence and disclosure: All conflicts of interest, or potential conflicts, must be revealed. Fiduciaries must maintain all of the client's confidences. All information affecting the client's interest must be revealed, even when information is gained in a confidential communication with another client. Fiduciaries have the responsibility to remain conflict free and be honest at all times.
3. Due diligence: Fiduciaries must exercise professional expertise in all aspects of the client's employ. From the original drafting of estate documents to the final disposition of probate litigation, trustees, attorneys and executors must execute their fiduciary duties with professional skill, good faith and fidelity.
Estate planning
Before drafting estate documents, the attorney must investigate any conflicts of interests, whether direct or potential. This assessment must include full disclosure of any dealings with the proposed beneficiaries and those who may hold a probate claim against the estate at execution.
Potential conflicts are most common, including excluded beneficiaries and lien holders against estate properties. Ethically, attorneys may not take a case where a direct conflict arises, unless the client waives his right to be protected from the conflict. Bar associations provide their ethical guidelines for conflicts of interest upon request.
When drafting a will, many people do it themselves. They should always submit it to an attorney before the document becomes irrevocable. Personal wills may not provide for estate or trust money to be set aside to pay professionals to handle probate costs. This means the beneficiaries will bear the cost, lessening the bequeath. The attorney's fiduciary responsibility will be to advise the client on the best strategies for protecting assets from excess taxes, penalties and legal reductions.
Appointing an appropriate executor or trustee is imperative. While many executors and trustees are family members, professional fiduciaries offer advantages. Professionals are ethically bound to remain conflict free, both from conflict with other people and personal interests. They have the financial expertise to best serve the estate and are not emotionally invested, allowing them to make more impartial judgments.
While insurance coverages offer relief from malpractice, the check will not console a client or his beneficiaries when an estate has been lost. To lessen the chance of malpractice, choose an attorney trained in estate planning specifically for the state in which he is licensed and who has achieved state certification where available.
Probate litigation
Probate courts exert jurisdiction over estates upon the death of the legator. If no will exists (intestacy), the probate court determines the estate beneficiaries statutorily. In most cases, the statute does not provide for the legatees the way that the decedent would have.
When a will has been drawn, but the beneficiaries disagree, probate court has jurisdiction. If a will is contested, fiduciary responsibility falls upon the attorney who drew the will, the attorneys representing the legatees and/or the contestants, the executor and/or the trustee.
If the estate document violates probate statutes, all parties to the will/trust have a malpractice claim against the attorney who drew the will. The attorneys representing the contestants are contract bound to seek benefits for their clients. Attorneys representing legatees hold fiduciary duty to maintain the legatees estate share based on the will.
Executors and trustees have additional fiduciary responsibility. Trustees must maintain or increase the value of the trust. Executors must administer the estate without depleting it. An executor or trustee breaches fiduciary duty when he causes the estate or trust to lose assets.
Neither will be held accountable for unforeseen losses, such as a volcano eruption destroying the estate's business. But both will be held accountable to the prudent man rule: "What would a prudent man have done under the same circumstances?" If the trustee directed the business to build on the lip of a volcano, he has breached his fiduciary duty.
Litigation provides relief for those whose fiduciaries breach duties. Seek the advice of counsel to ensure that criminal statutes have not been broken in the breach of fiduciary duty. If the conduct is not criminal, many disputes can be settled by appointing a different fiduciary.