Full Comprehension of One’s Fiduciary Duties in Trust and Estate Administration is Vital, as Executors and Trustees Must Prioritize Others’ Interests and Uphold their Legal Obligations.
In the world of trust and estate administration, special ethical obligations are entrusted to individuals in certain positions like executors, trustees, agents under a power of attorney, and guardians, known as fiduciary duties. Whether you are the beneficiary of a trust or will and you need help protecting your rights and interests, or you are a fiduciary who has been tasked with managing assets and you are in need of assistance or defense, the first step to navigating these issues is understanding the roles and responsibilities of a fiduciary.
A fiduciary is required to act in the best interests of another party. As it relates to trusts and estates, an executor of a will or trustee of a trust owes fiduciary duties of care, loyalty, and impartiality to the beneficiaries of the estate or trust. Executors and trustees are responsible for many tasks, including making financial decisions and investments, managing assets, and ensuring that the terms of the will or trust are carried out.
Duties and Decisions of NJ Executors and Fiduciaries
Executors are responsible for administering the estate of a deceased individual, paying any debts of the estate, and distributing assets to the beneficiaries. The executor must identify all outstanding debts of the estate, like credit card debts, back taxes, legal fees, and funeral expenses, and pay them off. Some types of debts, like student loan debt, may be extinguished with the debt of the individual, and the estate will not be responsible for repaying the student loan debt. Once all debts due have been paid off, the executor can distribute the remaining assets to the beneficiaries according to the terms of the will or intestate laws.
The estate may also have real estate property or personal property like artwork or jewelry that must be appraised in order to be properly distributed according to the terms of the will. Before giving grandma’s engagement ring to just one of her beneficiaries, it is important to know how much the diamond is worth so that the rest of the assets can be appropriately distributed. It is important to note that where the will does not provide specific directions, the executor has a lot of discretion in how to distribute the assets; however, they must not do so in a way that could constitute self-dealing. This is a particularly delicate balance if the executor is also a beneficiary themselves.
An executor is also responsible for filing tax returns on behalf of the estate, maintaining accurate records of any transactions from or to the estate, and communicating with beneficiaries, creditors, and other relevant parties.
When an individual takes the proactive action of creating a will, they will name an executor within the will. The executor of the will serves in a fiduciary role to the estate and its beneficiaries. However, if an individual dies without a will, then the intestate laws of their state will govern how their estate will be distributed and to whom. In this case, the probate court will appoint an individual to be the executor of the estate.
Another type of fiduciary is a trustee of a trust. The duties of a trustee generally span a longer period of time than those of an executor due to the nature of a trust, which may be formed while the grantor is still alive and endure for several generations, and the tasks of a trustee will also vary greatly based on the type of trust, whether revocable, irrevocable, or charitable in nature and the terms of the trust. For example, a trustee of a revocable trust will be required to manage the assets in the trust for the benefit of the grantor or the individual who owned the assets before putting them into a trust during their lifetime. An irrevocable trust operates differently, and the trustee may be required to make investments on behalf of the trust and distribute income to beneficiaries.
Other types of fiduciaries include guardians or conservators of individuals who may be minors or lack the mental capacity to make their own legal or financial decisions. Finally, those appointed as having legal, financial, or medical power of attorney also have a fiduciary duty to act in the best interests of the individual.
Establishing Fiduciary Relationships in New Jersey
In New Jersey, as in most other states, a fiduciary relationship is usually established in a legal instrument like a will, power of attorney, or a trust deed. These legal instruments typically designate the fiduciary and, in the event they cannot serve in the role, a back-up fiduciary. A fiduciary relationship may also be established through court order in the case of guardianship or in the area of trusts and estates if the originally named trustee is unable or unwilling to serve in the role. Additionally, New Jersey law applies certain legal duties on fiduciaries by default, such as the duty of loyalty and duty of care.
Consequences of Fiduciary Duty Breaches
If a fiduciary fails to act according to the requisite standard of care in carrying out their duties and responsibilities or if they act in self-interest rather than in the best interest of beneficiaries or guardians, then they may be in breach of their fiduciary duties. A fiduciary’s duty of care may be breached if they fail to exercise the level of care or skill that a reasonably prudent person with their training and experience would have exercised in the same circumstances. For example, if a trustee negligently invests money into a very high-risk investment without conducting any due diligence and the trust loses a significant amount of money as a result, the fiduciary has breached their duty of care to the grantor and/or the trust beneficiaries.
A fiduciary’s duty of loyalty may be breached if they fail to disclose a conflict of interest or make decisions that create a financial benefit for the fiduciary. Even if this financial benefit does not come at the expense of beneficiaries, it can still be a breach if the fiduciary does not disclose the conflict. This is caused self-dealing and may occur if a fiduciary enters into a transaction with one of their family members, makes an investment with trust funds into a business they have an ownership interest in, or in any other way creates a benefit for the fiduciary.
The consequences of breaching a fiduciary duty can be severe, including financial liabilities, removal from the fiduciary position, or even criminal liability if the fiduciary’s actions amount to theft or fraud.
Consult Our Estate Planning Lawyers in the Event of a Breach of Fiduciary Duties in Freehold and Monmouth County, NJ
Whether you are a beneficiary who believes that a fiduciary breached their duty of care or loyalty to you in carrying out their duties, or you are a fiduciary who is facing allegations of breaching your fiduciary duties, the experienced guidance and advocacy of an estate litigation attorney is critical to protecting your interests. At Chamlin, Uliano, & Walsh, our New Jersey estate litigation lawyers can provide you with the legal guidance necessary to determine whether a breach of fiduciary duties occurred and assess what evidence, if any, of this breach exists.
Furthermore, we can guide you and advocate on your behalf through dispute resolution between the relevant parties in Middletown, Belmar, Freehold, Red Bank, Manasquan, Wall Township, Ocean Township, Colts Neck, Hazlet and elsewhere in Monmouth County and South Jersey. Resolution that rights any wrongs committed and restores the parties to the position they would have been in had a breach not occurred or that clears the name of a wrongly accused fiduciary is generally preferable to protracted litigation. However, if and when litigation is necessary to protect our client’s interests, our team of estate litigation attorneys is ready and equipped to zealously represent you. Contact us for immediate assistance at 732-440-3950 or contact us on our website to speak with one of our lawyers.