Does an Executor or Trustee Have a Duty to Maintain Confidentiality?

The process of administering an estate after someone dies involves a lot of different responsibilities. The duties include collecting assets, paying debts and satisfying obligations, and distributing the remaining assets directly to beneficiaries or through a trust.

The individual who handles the administration of the estate is called the personal representative of the estate. That person can be an executor appointed in a will or an administrator appointed by the court, if there was no will or the appointed executor cannot serve. If there is a trust fund set up for estate assets, the person who administers the trust is called the trustee. These individuals, who are charged with administering the estate and assets are referred to as fiduciaries, have specific responsibilities under Michigan law.

Fiduciary Responsibilities

A fiduciary is a person who holds a position of trust and confidence with respect to the heirs and beneficiaries of an estate. Fiduciaries hold and manage property that belongs to the heirs and beneficiaries of an estate or trust and are held to very high standards of conduct in fulfilling their responsibilities.

Statutes impose specific duties on fiduciaries, including loyalty, impartiality, prudence in actions, and segregation of assets. With regard to investments, a fiduciary must usually conform to the prudent investor rule, a complex legal standard which requires the fiduciary to act as would a prudent person in dealing with the property of another.

In addition, unless expressly required by law, in response to legal process, or as necessary or proper for administration of an estate, a fiduciary is obliged to maintain confidentiality and is expressly prohibited by statute from:

disclosing facts or knowledge pertaining to property in the fiduciary’s possession or to the affairs of those for whom the fiduciary is acting in any manner without the consent of the heirs, devisees, beneficiaries… .

This duty of confidentiality does not apply to court actions or proceedings in which the fiduciary is a party adverse to one of the individuals protected by the confidentiality requirement.

On account of these statutory provisions, estate administrators, executors, and trustees all have the duty to maintain confidentiality regarding the property and matters for which they have fiduciary responsibility.

Remedy for Breach of Confidentiality

If an executor, other personal representative, or trustee breaches the fiduciary duty of confidentiality (or any other fiduciary duty), a petition can be filed in probate court asking the court to remedy the violation of the duty. If a petition is filed, the court has the authority to:

  • Compel the fiduciary to perform his or her duties;
  • Order the fiduciary to refrain from breaching his or her duties;
  • Force the fiduciary to correct a breach of duty by appropriate means;
  • Order the fiduciary to account;
  • Appoint a special fiduciary to assume possession of the estate or trust property and administer the property;
  • Suspend the fiduciary;
  • Reduce or deny compensation to the fiduciary;
  • Void an act of the fiduciary, impose a lien or constructive trust or property, or recover property or proceeds.

Only interested persons can file a petition in probate court to remedy a breach of confidentiality. Interested persons include:

  • An heir or devisee;
  • Child or spouse of the decedent;
  • Creditor of the estate or trust;
  • Beneficiary of the estate or trust;
  • A person with a claim against the estate or trust;
  • A person with priority for appointment as personal representative;
  • A fiduciary representing an interested person.

Identification of interested persons can vary and is determined according to a particular matter and proceeding.

If a petition is filed, the probate court will hold a hearing, where evidence will be introduced concerning the claim of breach of confidentiality. Evidence can include documents as well as witness testimony. In addition to the person filing the petition, witnesses likely will include the fiduciary, heirs and beneficiaries, and any other individuals who may have been involved in the circumstances constituting the claimed violation of duty.

After the hearing is concluded, the court will review the evidence and render a decision. The determination will typically include factual findings about the allegations, as well as any necessary action that is taken regarding the fiduciary and his or her responsibilities.

Asserting and proving violation of a fiduciary duty like a breach of confidentiality is a complicated court action and proceeding. The law relating to estate administration, trusts, and fiduciaries is extremely complex and detailed. Filing the petition and presenting the case in court requires an attorney experienced in probate litigation.

There are additional provisions in Michigan law for trustees, which may apply if a fiduciary duty has been violated by a trustee. Additional information is provided in our article, Removal of a Trustee in Michigan: The Rules Are Clear.

Talk With Our Respected Michigan Probate Litigation Attorneys

Any matter involving conduct of an executor, trustee, or other fiduciary that may be questionable is a very serious matter and should not be ignored. Assets are often at risk when a breach of fiduciary duty occurs.

Our BRMM probate litigation attorneys know the law and have substantial experience in legal issues and actions relating to fiduciary conduct. We will discuss the situation with you, explore options, and help you make an informed decision about how to proceed. There is no charge for your initial consultation.

From our office in Troy, we serve clients in southeastern Michigan and throughout the state, as well as assist out-of-state residents with an interest in a Michigan estate or trust. We also work with clients who have property or interests in both Florida and Michigan.

Call us at (248) 494-4577 or complete our online form to set up your free initial consultation.

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