Fiduciary Litigation 

Fiduciary litigation in the context of trusts and estates refers to legal disputes involving the breach of fiduciary duties by individuals who are entrusted with managing the assets of a trust or estate. A fiduciary is a person or entity (such as a trustee, executor, or personal representative) who has a legal obligation to act in the best interests of another party, typically beneficiaries of a trust or the heirs of an estate.

Fiduciary litigation often arises when beneficiaries or heirs believe that the fiduciary has failed in their duties, either intentionally or through negligence, leading to harm or unfair treatment of the trust or estate. This type of litigation can involve claims for breach of fiduciary duty, disputes over the administration of a trust or estate, and challenges related to the management and distribution of assets.

 Key Types of Fiduciary Litigation in Trusts and Estates

 1) Breach of Fiduciary Duty

A breach of fiduciary duty occurs when a fiduciary (e.g., a trustee or executor) fails to act in the best interests of the beneficiaries or heirs or places their interests ahead of the beneficiaries.   Fiduciaries have a duty to act with loyalty, care, and good faith regardless of whether they are also a beneficiary. Common examples of breaches include:

• Failure to Disclose: A fiduciary breaches his duty to disclose when he does not provide beneficiaries with the necessary information about the management, status, or transactions involving trust or estate assets. They have a legal obligation to act in good faith, with transparency, and to keep beneficiaries informed. Failure to fulfill this duty undermines trust and can harm the beneficiaries’ interests. Examples of nondisclosure include:

• Withholding financial accountings or records of trust or estate transactions.
• Failing to notify beneficiaries of significant decisions, such as asset sales or distributions.
• Concealing conflicts of interest or self-dealing actions.
• Providing incomplete, false, or misleading information.

• Self-Dealing: When the fiduciary uses their position to benefit themselves at the expense of the trust  or estate or its beneficiaries. Fiduciaries have a duty to act solely in the best interests of the beneficiaries, and self-dealing violates this duty by creating a conflict of interest. Examples of self-dealing include:

• Using trust funds for personal investments or expenses.
• Purchasing trust property for themselves at below-market value.
• Selling their own property to the trust at an inflated price.
• Favoring their own interests or those of certain beneficiaries over others without justification.

• Mismanagement of Assets: The fiduciary fails to invest or manage trust assets prudently, causing the value of the trust or estate to diminish.
• Failure to Distribute Assets: The fiduciary delays or improperly distributes assets to the beneficiaries, violating the terms of the trust or estate plan.
• Conflict of Interest: The fiduciary has conflicting interests or personal stakes that affect their ability to act impartially.

2) Trustee Mismanagement and Fraud

Trustees and executors have an obligation to act honestly, avoid conflicts of interest, and manage trust assets for the benefit of beneficiaries. Fiduciary litigation can arise when a trustee engages in fraudulent activities, such as:

• Misappropriation of Funds: A trustee improperly takes money from the trust for their personal use or allows funds to be stolen.
• Failure to Keep Accurate Records: Trustees must maintain proper financial records and provide beneficiaries with periodic accountings. Failure to do so can lead to disputes over the estate’s or trust’s financial condition.
• Deliberate Concealment: A trustee may be accused of deliberately hiding assets or failing to disclose important information about the estate or trust.

In these cases, beneficiaries may seek removal of the trustee, a court-ordered accounting, or damages.

 3) Disputes Over Trust Administration

Disagreements can arise between beneficiaries and trustees regarding how the trust is administered. These disputes may involve:

• Interpretation of Trust Terms: Beneficiaries may challenge the trustee’s interpretation of ambiguous or unclear provisions in the trust document, leading to litigation over the correct distribution of assets.
• Failure to Follow Trust Instructions: A trustee may be accused of not adhering to the specific terms and instructions of the trust, such as making improper distributions or failing to uphold the intent of the trust.
• Delays in Administration: A beneficiary may file a claim if the trustee delays the administration of the trust, potentially causing financial harm or prolonged uncertainty.

Courts may intervene to clarify the trustee’s duties, order distributions, or even replace the trustee if there is evidence of misconduct or failure to act in accordance with the trust’s terms.

 4) Executor Misconduct in Estate Administration

Fiduciary litigation also occurs when there are issues with the administration of a decedent’s estate. Executors (or personal representatives) are responsible for carrying out the decedent’s wishes, paying debts, and distributing assets to heirs or beneficiaries. Surviving family members or beneficiaries can bring an action to compel the executor to fulfill their responsibilities or seek removal if misconduct is proven.  Examples of executor misconduct include:

• Failure to Pay Debts or Taxes: An executor may be sued for failing to properly pay the decedent’s debts, taxes, or other obligations, which can harm the estate and its beneficiaries.
• Improper Distributions: The executor might be accused of distributing assets incorrectly or in a manner not in accordance with the decedent’s will.
• Failure to Act in Good Faith: Executors are expected to act impartially and in the best interests of all beneficiaries. If they favor certain beneficiaries or neglect the interests of others, a claim can arise.
• Failure to Distribute Estate Assets: Once all assets are collected and debts are paid, the Executor is required to distribute the assets according to the will or heirship order.  Failure to distribute the assets and keep the estate administration open unnecessarily can give rise to a claim to distribute the estate to the rightful beneficiaries. 

 5) Removal of a Fiduciary

In some cases, the beneficiaries may seek the removal of a trustee or executor due to misconduct, incapacity, or failure to perform their duties. Grounds for removal can include:

• Breach of Fiduciary Duty: The fiduciary’s actions have harmed the trust or estate, and they have failed to act in accordance with their obligations.
• Conflict of Interest: The fiduciary is engaged in activities that conflict with their duty to the beneficiaries, such as making decisions based on personal gain.
• Incompetence or Incapacity: If the fiduciary is unable to fulfill their duties due to incompetence, illness, or other reasons, a court may decide to remove them and appoint a successor fiduciary.

6) Accounting Disputes

Beneficiaries have the right to request an accounting of the trust or estate administration. If the fiduciary fails to provide a proper accounting or if the accounting is disputed (e.g., if the beneficiaries believe the accounts are inaccurate or incomplete), litigation may arise. Beneficiaries can request the court to compel a formal accounting, audit the trust’s or estate’s financial records, and resolve disputes over funds.

 At Baxter-Thompson Law, we have experience and knowledge to represent you in fiduciary litigation proceedings.  We offer our services based on an hourly rate or a contingent fee arrangement, depending on the circumstances. A contingency fee is not always appropriate.  During your case evaluation, we will discuss the unique circumstances of your case and whether a contingency fee is a viable option.