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What is breach of fiduciary duty by a trustee?

Maybe you have noticed something is unusual or just does not set right with a relative’s trust fund management. A breach of trust committed by a trustee is when someone else besides the beneficiaries benefits from how a trust’s assets get used.

This can happen several ways. Recently, a bank was the defendant in a fiduciary breach court case that resulted in the plaintiffs receiving a historic award of 8 billion dollars. Here are some common ways that breach of fiduciary duty happens.

The Majority Rules

The trustee is supposed to maintain and grow a trust account based on what is good for all, or at least a majority, of the beneficiaries. When most recipients do not benefit from the trustee’s actions, it is likely that a breach occurred.

Mismanaged Accounts

Either negligence or actions done in bad faith are both forms of mismanagement. When damage or loss happens to a trust, mismanagement is often to blame. A breach cannot be alleged if the trustee was acting in good faith but was incompetent in the discharge of his duties.

Conflictual Circumstances

Breach of fiduciary duty also occurs if there are management actions that prove to conflict with the interests of the trustees. This can include the trustee accepting bribes contingent upon executing specific steps in the trust or acting to enrich himself at the trustees' expense.

Self-Dealing

In contrast to putting the trustee duty first when it comes to management of an estate, self-dealing involves the trustee working for his or her own benefit. Being knowingly wasteful with discretionary funds, committing outright theft or changing document stipulations are all forms of self-dealing.

If legal action finds that the trustee committed a breach of fiduciary duty, the beneficiaries of the trust may be able to collect damages through litigation. That’s what happened in the case of the Hopper Trust vs. JPMorgan Chase. The jury awarded the trust 8 billion dollars to “ send (the bank) a message” that fiduciary breach is wrong.

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