Having a clear understanding of what a breach of fiduciary duty is is crucial for safeguarding your rights and assets. A breach of fiduciary duty is when someone legally responsible for acting in your best interests fails to fulfill their obligations.
Whether it involves mishandling assets in a trust or engaging in dishonest practices, breaches of fiduciary duty can lead to significant financial and emotional harm.
At Vistas Law Group, we have over two decades of experience in estate planning and trust administration. Throughout our practice, we’ve guided many clients through the complexities of fiduciary relationships, always with a commitment to personalized care and bilingual support.
What Is a Fiduciary Duty?
A fiduciary duty is a legal obligation that one person has to act in the best interests of another. It’s built on trust, confidence, and the expectation that the fiduciary will always prioritize the needs of the beneficiary above their own.
Whether we’re talking about a trustee managing assets in a trust or an executor handling an estate, fiduciaries are bound by a legal responsibility to act with care, loyalty, and good faith.
Fiduciary Duties Under California Law
In California, fiduciaries have specific duties they must follow. Let’s break those down:
- Duty of Care: Fiduciaries are expected to manage assets with diligence and reasonable skill. Whether it’s making financial decisions or handling paperwork, they must be thorough and careful.
- Duty of Loyalty: This means always putting the beneficiary’s interests first. Conflicts of interest, like using estate funds for personal gain, are strictly prohibited.
- Duty of Good Faith: Fiduciaries must act with honesty and integrity in all dealings. Any form of deception or manipulation goes against this duty.
- Duty of Confidentiality: Keeping private information secure is another critical responsibility. Disclosing sensitive details without consent can lead to legal issues.
- Duty of Prudence: Fiduciaries are required to make informed, thoughtful decisions, particularly when it comes to investments or asset management.
- Duty to Disclose: Keeping beneficiaries informed is essential. Fiduciaries must provide regular updates and share relevant information as needed.
Breach of Fiduciary Duty in California
A breach occurs when a fiduciary does not fulfill their legal duties or fails to act in the best interests of the beneficiary.
This can happen through negligence, intentional misconduct, or even an honest mistake that results in harm. Breaches often lead to financial losses, broken trust, and legal disputes.
5 Common Examples of Breaches of Fiduciary Duty in California
Breaches of fiduciary duty can take many forms, each with the potential to cause harm to beneficiaries. Below, we outline five common examples and what they involve.
Self-Dealing
Self-dealing happens when a fiduciary acts in their own interest rather than the beneficiary’s. For instance:
- An executor hires their own business to perform estate-related tasks at inflated costs.
- A trustee invests trust funds into their personal ventures.
- An attorney uses a client’s funds for personal expenses.
Evidence of personal gain at the expense of the beneficiary is key to proving self-dealing.
Conflict of Interest
A conflict of interest arises when a fiduciary’s personal interests clash with their duties. Examples include:
- A trustee favors one beneficiary over others to maintain a personal relationship.
- A fiduciary representing both sides in a property sale creates competing loyalties.
To prove a conflict, it’s necessary to show that the fiduciary’s divided interests influenced their actions and hurt the beneficiary.
Mismanagement of Assets
Fiduciaries are responsible for properly managing assets, and failing to do so can lead to significant losses. Examples of mismanagement include:
- Making poor investment decisions.
- Failing to insure the valuable property.
- Allowing real estate to fall into disrepair.
In cases of mismanagement, beneficiaries must show that the fiduciary’s negligence directly caused them harm, often supported by records of bad decisions or ignored responsibilities.
Lack of Communication
Fiduciaries must keep beneficiaries informed and provide updates on financial matters. Failing to do so can be a breach of duty. Examples include:
- Not providing annual accountings or financial statements.
- Ignoring beneficiary inquiries or withholding important information.
When communication breaks down, it can lead to misunderstandings, mistrust, and legal action.
Undue Influence
Undue influence occurs when a fiduciary uses their position to manipulate a vulnerable beneficiary. This is especially common with elderly or dependent individuals. Examples include:
- Pressuring a beneficiary to change their will in the fiduciary’s favor.
- Manipulating someone into signing over control of assets.
To prove undue influence, there must be evidence of coercion or manipulation that overrode the beneficiary’s free will.
Consequences of a Breach of Fiduciary Duty
When a breach occurs, beneficiaries have the option to seek justice. Remedies may include:
- Financial Compensation: Recovering losses caused by the fiduciary’s actions.
- Removal of the Fiduciary: Ensuring the individual no longer has control over assets or responsibilities.
- Injunctions: Preventing further harmful actions.
For fiduciaries, the consequences can be severe, ranging from personal financial liability to damage to their reputation and even loss of professional licenses.
Suspect a Breach of Fiduciary Duty? Vistas Law Group Can Help.
If you’re concerned about a potential breach of fiduciary duty, it’s important to act quickly to protect your interests.
At Vistas Law Group, we bring over 20 years of experience in trust and estate litigation to the table. Our personalized approach ensures that your unique situation is handled with care and attention.
We also offer bilingual services to make sure every client’s needs are met, whether they’re more comfortable in English or Spanish. If you’re in Los Angeles, call us at (213) 745-8747, or reach out to our Inland Empire office at (951) 307-9154 for a consultation.
Let’s work together to protect what matters most.