An estate plan can establish several important relationships to help ensure the management of assets. A testator names an executor of the estate to manage and settle assets, including paying debts and taxes and contacting beneficiaries. A grantor can set up a trust, which is an arrangement for the management and distribution of assets. The grantor arranges this trust with a trustee, who distributes assets to beneficiaries.
Both executors and trustees are bound by a legal duty to always act in the best interests of the beneficiaries. This is established in their fiduciary duty. Here is what you should know:
The duty to act in the best interests of the beneficiaries
The executor and trustee have a working relationship with the beneficiaries of the estate. The executor’s and trustee’s duties continue to the extent of the instructions left to them. To help ensure that the executor and the trustee fulfill their duties according to the instructions left to them, they are bound by their fiduciary duty. Their fiduciary duty includes:
- Duty of care
- Duty of loyalty
- Duty of good faith
- Duty of confidentiality
- Duty of prudence
- Duty to disclose
These duties help to ensure the interests of the beneficiaries are protected. A fiduciary duty extends beyond helping to ensure assets are distributed accordingly; the executor and trustee must not act in their own interests. An executor or trustee may breach their fiduciary duty if they self-deal, prevent the timely distribution of assets or mislead beneficiaries about their rights, for example.
When an executor or trustee breaches their fiduciary duties, beneficiaries may take legal action to correct the issue. Legal guidance can help beneficiaries resolve conflicts.