What is a Breach of Fiduciary Duty?

According to the Michigan Supreme Court, a fiduciary relationship exists when “one person is under a duty to act for the benefit of the other on matters within the scope of the relationship.” State laws impose a wide range of fiduciary duties in the context of estates and trusts. Failure to perform those duties can lead to a court action. But exactly what constitutes a breach of fiduciary duty?

Fiduciaries in a Michigan Estate

Michigan laws relating to trusts, estates, and protected individuals designate a number of positions as creating a fiduciary relationship and impose specific duties on the fiduciary. When you make an estate plan, you identify specific individuals or corporations to act in a fiduciary capacity for your estate. Your fiduciaries include the executor named in your Will (assuming that the executor receives court approval to serve as the personal representative of your estate), the trustee named to administer a trust, and your agents under powers of attorney.

If a court appoints a personal representative for the estate of a person who died intestate, that person also holds a fiduciary position. In addition, a court-appointed guardian or conservator for a protected individual has fiduciary duties.

What are Fiduciary Duties?

The exact nature of a fiduciary’s duties depends to some extent on the position held. Generally, a fiduciary has the duty to act in the best interests of the person or persons who benefit from the fiduciary’s actions and conduct. Depending on the position, the duties are owed to the beneficiaries or heirs of an estate, the principal under a power of attorney, the beneficiaries of a trust, or a protected individual.

A fiduciary’s obligations typically include making financial decisions that are in the best interests of the benefit recipient. Duties also include managing and distributing assets in accordance with the terms of the legal document that designates the fiduciary, such as a Last Will and Testament, trust, power of attorney, or court order.

Laws frequently require fiduciaries to provide specific reports and accounting to the benefit recipient or to the court as part of their duties. A fiduciary also is required to abide by all statutes relating to processes involved in the fiduciary relationship, such as probate of an estate or administration of a trust.

Breach of Fiduciary Duty

A breach of fiduciary duty can occur in many different ways. In some cases, the breach will be due to specific conduct of a fiduciary, such as actions taken in the fiduciary’s own financial interest, rather than in the financial interest of the benefited persons. A breach also may occur through the fiduciary’s failure to fulfill their obligations, such as not providing required reports or information to the benefited persons. The fiduciary’s conduct relating to a breach usually involves some type of dishonesty or neglect.

To establish a breach of fiduciary duty, it is first necessary to establish the specific duty owed by the fiduciary. Since the duties of a specific fiduciary are often imposed in statutes, it is frequently possible to point to a specific statutory obligation of the fiduciary.

After the specific duty of a fiduciary is identified, violation of the obligation must be shown through factual evidence relating to the fiduciary’s conduct. Analyzing a potential breach of duty and proving the violation requires assistance from an experienced probate litigation lawyer.

Remedies for a Breach of Fiduciary Duty

To remedy a breach of fiduciary duty, the persons who benefit from the fiduciary’s obligations or an interested party must file a petition in court. Michigan courts have broad authority to order relief when a violation of fiduciary duty occurs.

The appropriate remedy depends largely on the nature of the breach of duty. A judge may order the fiduciary to take specific actions or refrain from certain conduct, if that would be sufficient to remedy the violation. In extreme cases, the court may remove the fiduciary and appoint a successor to assume the responsibilities of the position. In some situations, a fiduciary who violates a duty may be held financially responsible for damages.

For examples of what actions a court may take for a violation of fiduciary responsibilities, you may read our previous blog posts, What Happens If the Personal Representative of an Estate Fails to Administer the Estate Properly? and How Do You Remove a Trustee in Michigan?

Talk with Our Michigan Litigation Attorneys About a Breach of Fiduciary Duty

If you may have a claim against a fiduciary or need assistance with a situation involving the conduct of an executor, personal representative, trustee, agent under a power of attorney, or another fiduciary in an estate or trust, our Michigan litigation lawyers are here to help you. Our substantial litigation experience and our extensive practice in estate administration and probate position us extremely well to help clients who encounter issues with a fiduciary.

At BRMM, we’ve been providing legal services to clients for more than 40 years. Our compassion, credentials, and commitment set us apart. Call us at (248) 494-4577 to talk with us about matters relating to estate administration or other areas of concern. We serve clients in Troy, Oakland County, and surrounding areas, as well as out-of-state clients with estate and probate matters arising in Michigan.
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