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What happens if someone sues you for breach of fiduciary duty?

| Feb 28, 2021 | Probate

When someone designates you as the executor of his or her will, you become the administrator of his or her probate estate when (s)he dies. This makes you a fiduciary. As FindLaw explains, this means that you represent the estate and its beneficiaries, i.e., the heirs. Everything you do as you carry out your duties must be done for their benefit.

Should an heir believe you treated him or her unfairly in comparison to the other heirs, or that you somehow acted in your own best interests as opposed to the best interests of the estate, (s)he may sue you for breach of your fiduciary duty.

Breach versus mistake

Keep in mind that breach and mistake are not synonymous. No one can sue you for making an unknowing mistake that decreases the value of the estate. For instance, if you make what you think is a wise investment on behalf of the estate, but the stocks you invest in decrease rather than increase in value, this does not constitute a breach of your fiduciary duty.

Rather, to prove breach, the plaintiff must prove that you knowingly did something that harmed him or her. Common examples of breach include the following:

  • Knowingly giving false, misleading or inadequate information to one or more of the heirs
  • Knowing favoring one heir over the others
  • Knowingly decreasing the estate’s value
  • Knowingly acting in your own interests rather than the interests of the estate and its heirs

Possible consequences

Should the plaintiff prove that you breached your fiduciary duty, you likely will have to reimburse him, her or the estate itself the amount of decrease your deliberate actions caused. The court may also award punitive damages if it finds that your actions rose to the level of fraud.