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Careful planning can protect against a breach of fiduciary duty

There comes a point for most people in California when they are no longer able to manage their own financial affairs. Individuals can plan for that day by naming a fiduciary agent in their estate planning documents.

AgingCare.com explains that this may be a financial power of attorney agent who will take over when a person is incapacitated, or it could be a trustee who manages assets in a trust. These roles both come with a hefty amount of responsibility, as the duties involve making financial decisions that have such a big impact on the lives of the beneficiaries.

By establishing a legal relationship with a fiduciary, an individual sets the stage for beneficiaries to hold the agent responsible for the duties. According to FindLaw, when a person is clear about the relationship and the scope of the duties of the agent, breaches are more easily identifiable. A breach may be an act or a failure to act, whether out of negligence or on purpose. The following are common breaches of fiduciary duties:

  • Failing to provide important information 
  • Misappropriating funds
  • Misusing the influence of the position
  • Neglecting responsibilities
  • Misrepresenting statements of fact

While beneficiaries have a right to hold the agent responsible, they may not be able to file a lawsuit against him or her unless there are actual financial damages that are directly related to the breach. However, if they believe that the breach of fiduciary duties occurred because of malice or fraud, then they may be able to sue for punitive damages, as well.

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