Who Cares About Fiduciary Duties and Trust?
Are you an estate beneficiary or expect to become one? Then you have to trust executors to deliver your inheritance. And executors, you can’t do your job without understanding your fiduciary duties.
Are you waiting to inherit or are you an executor? Here’s what you need to know about duty and trust.
Executors Have Fiduciary Duties
Estate beneficiaries trust executors to deliver their inheritance intact.
No one supervises the day-to-day activities of executors. So how does anyone know they are doing things properly?
The law imposes fiduciary duties on executors to keep them honest. Break one of the duties and the law smacks you down. Lawyers call this a breach of trust or breach of fiduciary duty. Courts punish executors who breach fiduciary duties to keep others in line.
Who Are Fiduciaries?
Fiduciaries are people in relationships who are entrusted to care for others. They are required to act honestly. Estate trustees and executors have always had fiduciary duties. Trust companies acting as estate trustees are often called corporate fiduciaries.
Not everyone is a fiduciary. It depends on the context and relationship. The law recognizes some relationships are subject to special treatment. Typically, this applies to lawyer/client, doctor/patient and executor/beneficiary relationships.
The concept of fiduciary duty has been around for centuries. Fiduciary duties, like negligence, are flexible and are constantly being redefined. Negligence is a failed duty to use reasonable care to avoid injury. The courts find new circumstances every day to apply these terms.
Laws expand to cover new areas for negligence and fiduciary duties. These duties can arise by legislation, contract or a relationship.
Financial Advisors and Fiduciary Duties
Recent public debates have considered including fiduciary duties for financial advisors. Some are concerned that advisors’ personal interests interfere with clients’ interests.
Do advisors with discretionary decision-making powers have fiduciary obligations? That may depend on who has power and who is dependant.
People trust advisors with their life savings and confidential information to get their dream retirement plan. Do advisors have duties to:
- provide the best advice or only suitable choices?
- avoid conflicts of interest or make the highest fees?
- put their clients’ interests first or their own interests?
Beware – conflict of interest
Fiduciaries have duties to avoid conflicts of interests.
Clients cannot always spot conflicts of interest. They need to know advisors, executors and lawyers do not have any conflicts.
Rules need to be in place to disclose conflicts.
What are Executor Fiduciary Duties?
Fiduciaries have positive obligations to perform certain duties.
Executor fiduciary duty is often described in positives (“do this”) and negatives (“don’t do that”).
Here are some examples of executors’ positive duties:
- put estate interests first
- protect estate assets
- keep estate assets separate from their own assets
- be impartial and treat all beneficiaries fairly
- follow valid will instructions
- keep good financial records
Now consider some examples of executors’ negative duties:
- delegate their responsibilities but must act personally
- delegate their decision-making to anyone else
- make a profit from their position (executor compensation is not profit)
- put their interests ahead of the estate
- fail to act prudently with investments
Executors must honestly look after beneficiaries’ best interests. Beneficiaries need to trust executors’ good judgment.
Do Executors Need Lawyers?
Executors need probate lawyers to advise them of their legal duties. Your probate lawyer should explain your fiduciary duties. In my law office, we answer probate questions every day.
Your executor fiduciary duties depend on:
- the nature of estate assets (high risk, perishable assets, real estate)
- type of beneficiaries (minors or trust)
- wording of the will (complex and confusing)
- any existing contracts signed by the deceased (marriage or separation)
- recent changes in the law
Consult a Probate Lawyer
Do you need a consultation about your executor fiduciary duties? Call me before it is too late.
About Edward Olkovich
Executors facing estate challenges call Ed Olkovich, who is a Toronto estate lawyer and Certified Specialist in Estates and Trusts Law. Ed is also an author and edits Carswell’s legal guide Compensation and Duties of Estate Trustees, Guardians and Attorneys. He has resolved estate disputes and probate problems since 1978. © 2016Posted By: Ed Olkovich In: Estates, Executors, Probate On: May 29th, 2016