What is a Fiduciary Duty?
A fiduciary duty is a special relationship between parties. One party puts another parties’ interest above their own. There are strict rules that ensure a party with a fiduciary duty always acts with the beneficiary’s best interest in mind.
A fiduciary duty exists in many professional relationships. Some relevant relationships include attorney-client privilege, as well as between a trustee of an estate and the estate’s beneficiary.
To Whom does an Executor of an Estate Owe a Fiduciary Duty?
An executor of an estate owes a fiduciary duty to the estate. This means that they must act fairly and impartial when dealing with the estate.
An executor of an estate owes the estate a formal fiduciary responsibility. The executor, by assuming their role, agrees to act for the benefit of the estate. This ultimately means ensuring the estate is protected during the probate process. This includes making sure the debts of the estate are properly accounted for and paid. After this, the executor must carry out the wishes of the estate in a manner consistent with good faith and loyalty, as well as Texas and Federal law.
What are an Executor’s Duties in the Probate Process?
Some of an executor’s duties include:
- Distributing the estate’s assets according to the terms of the will and Texas and Federal law;
- Locating and notifying the named beneficiaries in the will;
- Paying all valid debts;
- Giving notice to creditors of the decedent’s death;
- Identifying, documenting, protecting, and managing the decedent’s assets (including any pending legal matters the decedent might have been involved in);
- Preparing and filing tax returns;
- Taking all necessary steps to protect the estate’s assets;
- Paying all debts owed by the estate; and
- Keeping a strict accounting record of all the assets of the estate and tracking every action undertaken by the executor.
Which Actions Qualify as a Breach of Fiduciary Duty?
There are generally six fiduciary duties owed to an estate in Texas. These include:
- The duty not to engage in self-dealing;
- The duty to deal fairly and honestly;
- The duty to act with strict integrity;
- The duty of good faith and loyalty;
- The duty of full disclosure; and
- The duty of candor (the duty to be honest and forthright with courts).
Violating any or all of these duties could constitute a breach of fiduciary duty. In a general sense, this boils down to putting the beneficiary’s interest over that of the executor. If there is any chance that an action, or lack thereof, would harm the beneficiary or possibly enrich the executor instead of the beneficiary, a breach may have occurred.
What are the Consequences If these Duties are Breached?
An executor could face a civil lawsuit if they fail to perform their fiduciary duties and this failure results in harm or damages to the beneficiaries.
If the executor is an attorney, they could also face sanctions and potentially even have their law license suspended or lose it entirely if their actions are beyond restitution.
What Recourse is Available to an Interested Person if an Executor of an Estate Violates Their Fiduciary Duty?
A probate attorney can help you file a civil lawsuit against the executor of an estate if they have breached their duty owed to you and caused you damages. Assuming there are assets available after the breach of fiduciary duty, these assets could be turned over to the beneficiary. The executor might also face professional sanctions. This can serve as both a specific deterrent to the executor in question as well as a general deterrent to other would-be unscrupulous executors.
Hiring a reputable probate attorney to serve as the executor of a Will is prudent, and can help you avoid the above potential pitfalls.
Our experienced Houston Probate and Estate Planning Attorneys help clients comply with their fiduciary duties and represent clients in probate disputes involving fiduciary duties.