What Are Three Examples of Breaches of Fiduciary Duty?
The three most common breaches of fiduciary duty are self-dealing, misappropriation of assets, and conflicts of interest. For many of our clients, it is important to understand what fiduciary duties are and what it means to breach this responsibility. Whether you use this knowledge to identify red flags or prevent financial losses, we want to help you hold wrongdoers accountable and protect your assets.
Being able to recognize unscrupulous or unauthorized actions gives you an advantage in estate litigation. With this knowledge, you can feel better equipped to determine when a heart-to-heart conversation is the answer, and when to seek legal counsel. Stick with our team at Texas Will Contests, JV, as we share three examples of breaches of fiduciary duty, who can be held liable, and why.
What Does “Breach of Fiduciary Duty” Actually Mean?
A fiduciary breach happens when a trusted individual or organization violates their legal or ethical obligation by prioritizing their own interests over those they represent. Under Texas law, a fiduciary has legal and ethical obligations of loyalty, care, full disclosure, and good faith. Violations occur when they act for personal gain, act negligently, or engage in conflicts of interest. Three common examples of fiduciary duty breaches include the following.
Self-Dealing
Self-dealing occurs when a fiduciary uses their position for personal financial gain rather than benefiting their client or company. For example, an estate executor sells a property to themselves for below market value without beneficiary approval.
Misappropriation of Assets
In this case, the fiduciary is caught stealing, embezzling, or misusing funds or property entrusted to their care. For instance, an executor uses estate funds to pay their own personal expenses.
Conflicts of Interest
When a fiduciary fails to disclose or act on competing personal or financial interests, it is considered a breach of duty. For example, a trustee hires their own company to manage trust property and pays it above-market fees.
Who Is Legally Accountable for Fiduciary Misconduct?
Common examples of fiduciaries who can be held liable for a breach of duty include:
- Corporate directors and officers, for self-dealing, usurping corporate opportunities, or gross negligence
- Trustees and executors, for mismanaging assets, failing to distribute them properly, or favoring one beneficiary over another
- Financial and investment advisors, for recommending unsuitable investments or undisclosed conflicts of interest
- Business partners, for operating competing businesses or hiding profits
- Accountants, for charging unauthorized fees, falsifying tax documents, or concealing material facts
If you suspect a fiduciary duty breach by any of the above individuals, contact our team at Texas Will Contests, JV today.
Types of Liability Associated with Breaches of Fiduciary Duty
Fiduciaries who breach their duties may be held personally liable for the harm they cause. Consequences can range from repaying the losses to the estate or company or forfeiting ill-gotten gains, being stripped of their power, and even criminal charges if the breach involves embezzlement, fraud, or deliberate theft.
Talk With Our Firm to Learn More About the Common Types of Breach of Fiduciary Duty
While this guide showcases just three examples of breaches of fiduciary duty, there are many more. Reach out to the strategic probate and estate litigation attorneys at Texas Will Contests, JV, for more information.
Our client-focused team acts with honesty and transparency in every case. Earning your trust every step of the way is our highest priority. When your fiduciary mishandles your estate assets, conceals information, or prioritizes their interests, schedule a time to discuss your options, and because many of these matters are handled on a contingency-fee basis, you may be able to pursue your claim without paying attorney’s fees up front.