Fiduciary duty is a term applied to you when someone designates you as the trustee of his or her trust or as the executor of his or her will, and therefore the administrator of his or her estate when (s)he dies.
FindLaw explains that, in essence, “fiduciary duty” means that everything you do as a trustee or administrator must benefit the trust and its beneficiaries or the estate and its heirs. In other words, you must not put your own interests above theirs.
Mistake versus breach
As a fiduciary, you need not perform your duties perfectly. No one will hold you accountable for any inadvertent mistake or unknowing poor decision you make. You can only breach your fiduciary duty if you knowingly do something that runs counter to the interests of the trust/beneficiaries or estate/heirs.
Examples of fiduciary breach include the following:
- You knowingly act in your own interests rather than those of the trust/beneficiaries or estate/heirs.
- You knowingly provide inadequate, misleading or false information to the beneficiaries or heirs.
- You deliberately favor the interests of one of the beneficiaries or heirs over the interests of the others.
- You knowingly engage in a course of action that decreases the value of the trust or estate.
Breach of fiduciary duty lawsuit
Should you breach your fiduciary duty, the negatively affected trust/beneficiaries or estate/heirs can sue you. If they prevail, the court likely will issue a judgment against you that requires you to make restitution, possibly with interest from your date of breach. In an extreme situation, if the court determines that your breach amounted to fraud or some other egregious action, it could impose punitive damages over and above the plaintiffs’ actual damages.