If you agreed to take on the responsibility of becoming someone’s trustee or the executor of his or her California estate, you became a fiduciary whether you realized it or not. A fiduciary is one who holds and manages assets for the benefit of someone else, in this case, the grantor’s beneficiaries or the testator’s heirs. As fiduciary, you must put aside your own interests and work only for the benefit of the trust or estate, as well as its beneficiaries or heirs.
As FindLaw explains, you have numerous fiduciaries. Should you fail to carry them out properly and the trust or estate suffers a loss as a consequence of your breach, the beneficiaries or heirs can sue you.
Breach versus mistake
No one expects a fiduciary to be infallible. Human beings sometimes make mistakes, and the beneficiaries or heirs cannot sue you if you make one or even several. For instance, if you make a calculation error, this does not constitute a breach, but only a mistake. Likewise, if you make an unwise investment, this, too, does not constitute a breach.
You only breach your fiduciary duty if and when you deliberately do something against the best interests of the beneficiaries or heirs, such as the following:
- Act for your own personal benefit instead of the heirs’ or beneficiaries’ benefit
- Deliberately give insufficient or false information to the heirs or beneficiaries
- Deliberately do something not in the heirs’ or beneficiaries’ best interests
In order to win a breach of fiduciary lawsuit against you, the heirs or beneficiaries must prove all of the following:
- That you are the trustee designated in the trust or the executor designated in the will
- That your fiduciary duties were spelled out in the trust or will
- That you breached your duties by acting contrary to the trust’s or will’s provisions
- That your breach caused the trust and its beneficiaries or the estate and its heirs to suffer economic damages
Should the heirs or beneficiaries prevail against you, you could face personal liability for the amount of damages suffered. If the judge or jury finds your actions rose to the level of deliberate fraud or malice, you also could face paying punitive damages on top of the actual damages.
This educational information is not intended to provide legal advice.