When you become the administrator or executor of an estate or a trustee of a trust in Kentucky, you may not know what duties and obligations your position requires. Administering an estate or trust imposes various fiduciary duties. These duties require you to act for the benefit of the estate and its heirs/beneficiaries and to put those interests above others when administering the estate.
However, estate administration can involve challenging situations and decisions that may put you in a tough spot. Making the wrong choice might expose you to liability in a breach of fiduciary duty claim. When becoming a personal representative or trustee, get legal advice and guidance from an experienced estate administration lawyer at Berkley Oliver PLLC to understand your fiduciary duties and make informed decisions as you fulfill your obligations to the estate or trust. Contact us today to arrange a consultation to discuss your situation.
Understanding Fiduciary Duties in Estate Administration
A “fiduciary duty” refers to a person’s legal or ethical obligation to act for someone else’s benefit or best interests. The law refers to the person with the duty to act as the “fiduciary,” and to the party who benefits as the “beneficiary.”
Fiduciaries must perform their duties to the beneficiary with the utmost honesty, loyalty, and care for the beneficiary’s interest. Fiduciaries may not take actions that harm the beneficiary’s interest, especially when that action benefits the fiduciary’s interests. When a fiduciary breaches their duty of care to a beneficiary, the beneficiary may pursue legal action to recover compensation for losses they incurred or benefits the fiduciary obtained through their breach of duty.
In estate administration, an executor or administrator has fiduciary duties to the estate, its creditors, and its heirs or beneficiaries. Similarly, a trustee owes fiduciary duties to the trust and its beneficiaries. Personal representatives or trustees may not take actions that benefit themselves to the detriment of the estate, the trust, or the beneficiaries.
Fiduciary Duties of an Executor, Administrator, or Trustee
In estate administration, a personal representative or trustee owes several fiduciary duties to the estate, trust, and beneficiaries. These duties include:
- Duty of Loyalty – A personal representative or trustee must act in the best interest of the estate or trust and the beneficiaries. This duty also requires fiduciaries to avoid conflicts of interest.
- Duty of Care – The duty of care requires personal representatives or trustees to prudently manage assets, such as making reasonable investment decisions for trust assets or preventing waste of estate assets (i.e., allowing a property to fall into disrepair or not maintaining the value of business assets). The duty of care also requires fiduciaries to keep accurate financial records, which allow beneficiaries to monitor the fiduciary’s performance.
- Duty of Impartiality – The duty of impartiality requires a personal representative or trustee to treat all estate or trust beneficiaries fairly and according to the terms of the will or trust. When fiduciaries must balance competing interests among beneficiaries, they must resolve conflicts in a reasonable, objective, and justifiable manner.
Common Challenges Faced by Personal Representatives and Trustees
Some of the most frequent challenges and legal disputes that personal representatives and trustees can face when discharging their fiduciary duties include:
- Conflicts of Interest – A personal representative or trustee may face conflicts between their own interests and those of the estate or trust and its beneficiaries. One typical example of conflicts of interest is receiving fees for services to the estate or trust. Conflicts of interest may also arise for a personal representative who is also named as a beneficiary in the will.
- Mismanagement of Assets – Beneficiaries may accuse a personal representative or trustee of mismanaging estate or trust assets, such as making poor investment decisions, generating excessive professional advisor fees, or not maintaining the value of assets (e.g., not maintaining or repairing real property, not paying taxes, etc.).
- Poor Communication – Fiduciary duty claims may also arise over communication issues between fiduciaries and beneficiaries, especially when beneficiaries perceive a lack of transparency or fiduciaries fail to provide timely responses or updates.
Estate and trust fiduciaries may face legal consequences for breaching their duties. Beneficiaries may file lawsuits against a personal representative or trustee to compel an accounting of the estate or trust, which can provide the beneficiary with the evidence needed to pursue a breach of fiduciary duty claim.
In a breach of fiduciary claim, a personal representative or trustee may face various consequences for breaching their duties. Beneficiaries may seek to remove a personal representative or trustee from their position. Fiduciaries may also bear personal liability for financial losses incurred by beneficiaries due to the fiduciary’s breach of duty, including the loss of any security bond the personal representative or trustee had to post upon their appointment.
How Our Firm Helps Personal Representatives Navigate Fiduciary Duties
At Berkley Oliver PLLC, our attorneys help personal representatives and trustees fulfill their fiduciary duties during estate and trust administration. Our team takes the time to explain fiduciary obligations to personal representatives and trustees and provide advice when fiduciaries face challenges in executing their duties, such as conflicts of interest or competing demands from beneficiaries. Our firm can also help personal representatives and trustees avoid potential legal disputes with beneficiaries by helping them keep accurate financial records and maintain transparency and close communication with beneficiaries as they execute their duties.
Contact Berkley Oliver PLLC Today to Discuss Your Obligations, Rights, and Legal Options
If you have been appointed to serve as executor or administrator of a loved one’s estate in Shelbyville, KY, you may need experienced legal advice and support to understand and fulfill your fiduciary obligations. Contact Berkley Oliver PLLC today for a free consultation to discuss how our attorneys can guide you through the estate administration process and help you fulfill your duties as the personal representative of a loved one’s estate.