When someone owes a fiduciary duty to another person or entity, it is a legal concept regarding their responsibility to put the other party’s interests first. They have to make decisions that are not necessarily based on their own best interests, but must prioritize someone else.
In an estate planning context, a trustee has a fiduciary duty to the beneficiary and the grantor of the trust. That trust was written in a specific way, and the trustee needs to administer it correctly and handle the assets responsibly. They need to make appropriate distributions, and all of their decisions should honor their fiduciary duty to the beneficiary.
Why would this become an issue?
Problems sometimes come up when trustees are accused of violating this fiduciary duty, especially if it appears that they have done so for personal financial gain.
For example, say that the rules of the trust state that the beneficiary can use the money to pay for their college tuition. The trustee is supposed to make withdrawals and pay the financial institution. If they fail to do so, it could be a violation of their fiduciary duty simply because they have not taken the necessary steps to put the beneficiary first and accomplish the goals of the trust.
Where this really becomes problematic, though, is if the trustee uses the money in a way that is not authorized. For instance, maybe the trustee is also a business owner, so they take money out of the trust and use it to fund their own business operations, rather than paying for the beneficiary’s college tuition.
The legal process
If there are questions about the violation of a fiduciary duty in the administration of a trust, legal steps may need to be taken to clarify how the funds should be used or even to remove the trustee. Those involved in this process need to know what legal options they have.