Having just completed my sixteenth year as a Connecticut probate judge, I’ve noticed an increase in litigation against fiduciaries; several of these have resulted in criminal prosecution of the guilty parties.
Fiduciary Defined
Most everyone has heard the word “fiduciary” but I suspect most don’t understand what a fiduciary is and the serious personal liability inherent in serving as one.
A fiduciary is a person or organization (such as a financial institution) required to place the interests of another person above theirs. It’s a very high legal standard.
In probate, examples of fiduciaries include lawyers, executors, administrators, guardians, conservators, trustees, health care representatives and agents under a power of attorney.
Common Mistakes
A significant mistake – one that frequently leads to litigation – is the failure of the fiduciary to understand their powers and responsibilities.
Sources of Fiduciary Powers and Responsibilities
Fiduciary powers and responsibilities come from 3 sources: court orders, the law, and a document, such as a trust, will, or power of attorney. Under the new Connecticut Uniform Power of Attorney Act, complex powers of attorney have become more common. While this complexity is designed to increase the flexibility of powers of attorney, it can make the agent’s authority and limitations difficult to understand and carry out without the services of an experienced trusts and estates attorney.
Don’t Get Caught in This Trap
Wills and trusts can be complex. It’s not unusual for a trust to be 60 pages or more in length. Serving as an administrator, executor or trustee should not be done without hiring an experienced trusts and estates lawyer; it’s virtually impossible for the average layperson to understand a trust, and even difficult for a general practice attorney with minimal trust experience to do so.
Maintain Complete Records…or Else
All fiduciaries engaging in financial transactions – paying claims and expenses, managing income and assets – must keep complete and accurate records. A fiduciary must be prepared to submit accountings to the court, even if the legal document establishing their authority excuses accountings. If the fiduciary’s dealings are called into question, it is the fiduciary’s responsibility to establish by clear and convincing evidence that their actions were proper and within the law. Failure to do so will likely result in a finding of breach of fiduciary duty.
A fiduciary who has breached their duty can be ordered to pay the estate they were responsible for (under a trust, will, power of attorney, conservatorship or guardianship) from their own personal funds. Criminal prosecution of fiduciaries who breached their duty happens frequently, and long prison sentences have been ordered in some cases.
Who is Benefiting: Conflicts of Interest
Another area rife for litigation is conflicts of interest. An example is when a widower gave his girlfriend authority over his finances under a power of attorney. If the girlfriend used the widower’s assets to pay her own expenses, or to pay the expenses of another (for example, the girlfriend’s children), a court could find that she breached her fiduciary duty. The consequences could include restitution, and even criminal charges.
There’s Much More
There are many more areas of importance for fiduciaries to be aware of that cannot be covered here.
Get an Estates and Trusts Lawyer!
Because of the complexity and potentially serious consequences, I strongly recommend anyone serving as a fiduciary retain an experienced trusts and estates lawyer to advise and protect them. While some fiduciaries may exercise their duties without a lawyer, the stakes are too high to risk something going wrong.
DISCLAIMER: This article is for informational purposes only. It is not intended to be, and should not be relied upon as legal advice. For advice as to your specific situation, please contact a qualified attorney.
Dom Calabrese has been a Connecticut Probate Judge since 2003, and since 1995 has practiced law in Connecticut with offices currently in Watertown and Stamford. He practices in the areas of estate planning, probate, asset protection and business counsel.
Copyright 2019 Domenick N. Calabrese. All rights reserved. The use, copying or dissemination of this article without the express written consent of the author is strictly prohibited.
Connecticut Estate Planning & Probate 