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What are the liabilities of a fiduciary?
A Power of Attorney Creates a Fiduciary Duty

Texas courts recognize that a person with a power of attorney owes the principal (the person who gave the power of attorney) a fiduciary duty. The holder of the power of attorney owes her principal a high duty of good faith, fair dealing, honest performance, and strict accountability.

When the fiduciary receives an alleged gift from the principal, the fiduciary has an extremely high burden to show that the gift was in the best interest of the principal. The courts have observed that the fiduciary relationship cast upon the profiting fiduciary the burden of showing the fairness of the transactions. By accepting both the role of fiduciary and gifts from the principal, the agent consents to have her conduct measured by a higher standard of loyalty.

In one case, the fiduciary never acted under her power of attorney. Therefore, she claimed, she did not have to meet the high burden of a fiduciary to prove that the gifts she received from the principal were in the best interest of the principal. The court rejected these arguments. The court found that the holder of the power of attorney owed the principal a fiduciary duty based solely on the power of attorney whether or not it was ever exercised. This finding placed the burden on the holder to prove the transfer of the principal's property to her was fair and in the best interest of the principal.

The violation of the duty that a holder of a power of attorney owes to the principal can result in a felony conviction. In one case, the facts were as follows: "Grace added Tyler as a signatory on her bank accounts, and executed a durable power of attorney naming Tyler as her "agent (attorney-in-fact)." The power of attorney gave Tyler power over all of Grace's assets." Tyler later misapplied the funds under her control by using some for her personal debts.

The criminal law in question, ยง32.45 of the Texas Penal Code says: "A person commits an offense if he intentionally, knowingly, or recklessly misapplies property he holds as a fiduciary or property of a financial institution in a manner that involves substantial risk of loss to the owner of the property or to a person for whose benefit the property is held." Tyler claimed that she had no formal trustee relationship with Grace, and therefore a fiduciary relationship "may not have" existed. In ruling that the existence of the power of attorney alone created the fiduciary relationship, the court upheld her conviction.
 
Start Here to Read About Problems with Trustees

Learn about troubles with an executor, administrator or other fiduciary.

Start here if you have questions about a fiduciary such as a trustee, executor, administrator, etc. Fiduciary is the general term. Anyone who has custody or control of funds or other property that belong to another is a fiduciary. An executor of a will is a fiduciary because he has custody and control of the estate's funds, the funds that belong to the beneficiaries of the will. An administrator is a fiduciary for the same reasons. The trustee of a trust is a fiduciary because he has custody and control of the trust property that belongs to the beneficiaries of the trust. A stock broker may be a fiduciary. A banker may be a fiduciary. What makes a person a fiduciary is that he has custody and control of funds or property that belong to another.

Background

There is a valid will or trust. You are a beneficiary of the will or trust or you are an heir when there is no will. You are having trouble because a fiduciary is misusing funds, is not accounting for funds or is not paying out funds from the will, trust or estate and you want to know what your rights are. This article should be your starting point to learn about fiduciaries. It provides general information about fiduciaries and their responsibilities. This general article will lead you to specific articles on the site and on our blog where you can find more detailed information about the particular question you have concerning fiduciaries. Click on any highlighted or underlined word to get more information.

Who is a fiduciary

Formal relationships. These include but are not limited to:

  1. holders of powers of attorney,
  2. executors and administrators,
  3. partners,
  4. agents, and
  5. spouses.

Informal relationships. These arise when a relationship is a moral, social, domestic or purely personal one and one person trusts in and relies on another. A fiduciary duty based on an informal relationship may arise when a high degree of trust, influence, or confidence has been acquired and abused. It may also arise either as a result of dominance on the part of one or weakness and dependence on the part of another.

Duty

The law places the most exacting civil duty recognized by law on fiduciaries. The fiduciary owes the beneficiary the duties of "...loyalty and good faith, integrity of the strictest kind, fair, honest dealing and the duty not to to conceal matters which might influence his actions to his principal's prejudice." They must place the interest of the beneficiaries above even their own interest. Everything they do with the funds and property in their care must be judge in the light of this question "how does this help the beneficiary?" If there is an action that does not help the beneficiary, the fiduciary is not allowed to do it. The fiduciary is not allowed to use the funds or property to benefit his own interest. If he does, he is guilty of self dealing. A trustee must not have a conflict of interest with the beneficiary or with the use of the funds or property in his control.

Accounting

The law requires that a fiduciary render an accounting of the funds that have come into his control as well as the funds that he paid out. The timing of this accounting varies but generally, he must account at least once a year. The fiduciary also must make an accounting when an accounting is demanded by a beneficiary.

Remedies

If a fiduciary fails to live up to the high duty imposed on him by law, he may be removed, made to pay any damages caused by his breach of duty, forced to return any property that he may have taken from the trust, denied compensation as well as forced to return any compensation that he has received, pay exemplary (punitive) damages and attorney's fees. Of course every case is different. There is never an excuse for a fiduciary violating his duty but the remedies juries impose will vary from case to case depending on the intent of the fiduciary. They will treat harshly the fiduciary who is milking the beneficiaries funds but will treat lightly the elderly aunt who hasn't stolen any money but who has not made regular accountings or disbursements. However, no matter their intent, if they breach their high duty imposed by law, the court will probably remove them.

  1. Removal.
  2. Actual damages.
  3. Disgorgement.
  4. Denial of compensation.
  5. Punitive or exemplary damages.
  6. Attorney's fees.

The foregoing information is general in nature and does not apply to every fact situation. If you are concerned about inheritance laws, have an inheritance dispute, a property dispute or want information about contesting a will, we can help. Please go to our main site www.theprobate.net and use the contact form to contact us today. We would love to learn about your case and there is no fee for the initial consultation.
 
Discover the Liability of a Fiduciary

A fiduciary is liable if he neglects his duty.A fiduciary owes the duty of loyalty and good faith, integrity of the strictest kind, fair, honest dealing, and the duty not to conceal matters which might influence his actions to his principal's prejudice.

If the fiduciary violates his duty, he can be liable for the actual damages caused by his violation as well as exemplary or punitive damages.

If you have questions about your inheritance rights and would like to talk to an estate planning attorney or a lawyer who is familiar with inheritance and probate law to advise you about your inheritance rights, click on the "Contact Us" tab at the top.