A fiduciary is a person appointed certain powers over property of another based on trust and confidence placed in the fiduciary at the time of the appointment. A fiduciary duty is the highest duty one may have toward another under law. It requires complete loyalty by the fiduciary to the principal. A fiduciary may not benefit in any manner from the relationship except as agreed to by the principal.
Examples of fiduciaries are trustees, executors, administrators, and attorneys-in-fact. Disputes in connection with fiduciary relationships are common and mostly derive from a breakdown in the relationship between the fiduciary responsible for the property in a trust or estate and the beneficiaries of the trust or estate. All fiduciary disputes share a common theme, but the circumstances of each dispute will vary based on several factors including whether the fiduciary is a trustee versus a personal representative versus a power-of-attorney.
Trustees
A trust is a legal relationship where property is held by one person for the benefit of another. The trust is created by a settlor, who transfers legal ownership of property to a trustee. The trustee holds and manages the property for the benefit of the trust’s beneficiaries according to the terms of the trust. Trusts are used for a variety of reasons: privacy, tax avoidance, preservation of government benefits, and maintenance of minor children, to name a few. Each is as unique as the property in it and the people it benefits. But the common element among all trusts is the fiduciary duty owed by the trustee to both the settlor and the beneficiaries.
A trustee is a type of fiduciary. In the context of a trust, a trustee owes the settlor the duty to abide strictly to the terms of the trust and must act in a manner consistent with the best interests of the beneficiaries of the trust. That duty, or rather the alleged breach of that duty, forms the basis of many trust disputes.
Another common complaint regarding the administration of a trust is the failure of a trustee to render an accounting. Georgia law requires a trustee to provide an accounting to certain qualified beneficiaries on an annual basis and at other times depending upon the circumstances, though the trust instrument or a separate writing by the settlor may waive that obligation. Georgia law also allows a beneficiary to request information from the trustee relevant to the beneficiary’s interest. Disputes related to accountings typically arise when no accounting is provided at all or the accounting is incomplete or incorrect. Often, the dispute is a result of the confusion as to when a trustee is required to provide an accounting. If the requirement has been waived, the complaining beneficiary must show evidence that the trustee appears to have mismanaged the trust or otherwise breached his fiduciary duty to obtain an order for an accounting.
Improper administration of a trust is a serious concern, and allegations to that effect should be carefully considered and researched. It is important to understand the rules of trust administration when either alleging improper conduct or defending such allegations. Our firm can help you understand those rules. If you are facing a trust dispute, please call us or send an inquiry.
Personal Representatives
A personal representative is the legal representative of a deceased person’s estate. Personal representatives are commonly referred to as executors and administrators. Unlike trustees, a personal representative must be appointed by a court. A personal representative’s obligations officially do not begin until the appointment is made, though under some circumstances a personal representative may be held liable for action or action prior to such time. Once appointed, there are both statutory and common law obligations that the personal representative must follow.
Another way personal representatives differ from trustees is the continued involvement of the court during the administration of an estate. In addition to the personal representatives fiduciary duties, Georgia law requires a personal representative to make certain filings with the court and newspaper publications. Many claims against personal representatives involve his failure to abide by these statutory obligations and may subject the personal representative to removal even if he has otherwise acted competently and in good faith in administering the estate.
Whatever the reason for a dispute, it must be taken seriously and acted upon swiftly. If there is fiduciary dispute related to an estate you are involved with, please contact us to determine where you stand.
Attorneys-in-Fact
Another type of fiduciary is an attorney-in-fact, more commonly referred to as a power-of-attorney. Power-of-attorney actually refers to the grant of authority given by a principal to an agent, also called the attorney-in-fact. Attorneys-in-fact may represent (i.e., act as agent for) for another person in any matter except in legal matters before a court of law (which is limited to representation by attorneys-at-law). The authority granted by a power-of-attorney may be very limited (e.g., authority to sell a particular parcel of real estate on behalf of another) or very broad (e.g., a general financial power of attorney, which gives the attorney-in-fact authority to act on the principal’s behalf in any financial matter whatsoever).
The primary difference between the duties imposed upon an attorney-in-fact and a trustee or personal representative are that an attorney-in-fact has no affirmative obligation to protect and preserve the property over which he has power. Whereas a trustee and personal representative are obligated to ensure the property is managed and distributed properly, an attorney-in-fact is simply permitted to use them. An attorney-in-fact’s fiduciary duties are invoked only when the attorney-in-fact does actually do something with the property over which he is power. He must use the property for the benefit of the principal only.
Despite the limited duties of an attorney-in-fact, plenty of disputes still arise based on abuse of a power-of-attorney. Most often, a power-of-attorney is abused when the principal becomes incapacitated and, therefore, no longer able to control the attorney-in-fact. The attorney-in-fact may take the opportunity to enrich himself at the principal’s expense. Of course, as with any other fiduciary dispute, the question of whether such abuse has occurred is as important as the extent of such abuse. Often, a fiduciary’s unusual way of handling a principal’s assets may give rise to suspicion but in substance be legitimate. Each case is different and requires a thorough analysis. The Libby Law Firm can provide that analysis and answer many other questions related to powers-of-attorney and other fiduciary matters. Please give us a call so we can help you assess your situation.
