Fiduciary duty means that an individual has a legal obligation to act in the best interest of another party. In most cases, this involves the management of another person’s money, property, or other assets. A breach of fiduciary duty occurs when the executor, or the fiduciary, behaves in a way that contradicts their duty. Depending on the circumstances, this can have serious legal consequences. To avoid a breach of fiduciary duty, it is important to understand some of the potential conflicts and take immediate action to resolve any conflicts that may arise.
Examples of fiduciary relationships include a board member who has a fiduciary duty to a company’s shareholders, a trustee who has a fiduciary duty to beneficiaries of a trust, or an attorney who has a fiduciary duty to a client. Both parties involved in the fiduciary relationships must sign a contract for the duty to be legally binding. The fiduciary is expected to be dependable, trustworthy, and discrete on behalf of their client and may not benefit personally at the expense of the other party.
Under no circumstances may a fiduciary act in their own best interest, or use corporate assets or an individual’s inheritance for their own personal advantage. If a fiduciary behaves in a way that has a negative impact on the client’s finances, or their reputation, the wronged individual may sue for damages, as well as any profits the fiduciary made as a result of the breach.
One way to avoid a breach in fiduciary duties is to have a thorough understanding of the transactions that are prohibited, so that you can avoid them. After the legally binding contract has been signed by both parties, make sure that the document is modified or updated any time a decision has been made that impacts the details of the contract. This will help prevent a breach of duty.
If an individual failed to uphold their fiduciary duty, either by withholding information, misappropriating funds, or abusing their position of power, the wronged person may pursue legal action against the fiduciary. They will need to provide proof that there was a fiduciary relationship, and the fiduciary did not act in their best interest. If the fiduciary benefited financially from the breach of duty, their financial records will help prove the breach. Depending on the circumstances, fraud may also be an issue, but the breach of fiduciary duty is much easier to prove than fraud.
If you have questions about a fiduciary relationship with another party, you are urged to contact our business lawyers at MacMain, Connell & Leinhauser. To schedule a confidential consultation, call us today at 484-318-7106 or contact us online. Our office is conveniently located in West Chester, Pennsylvania, where we serve clients throughout Philadelphia and Chester County.