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When a fiduciary goes wrong (and what to do about it)

A "fiduciary" is a legal term for a person or corporate entity (like a bank) with the authority and obligation to act for someone else. Fiduciaries can be executors of estates, trustees who administer trusts, guardians or other people who hold a special relationship of trust and confidence. Each fiduciary has a duty to act in good faith and in the best interest of the other party.

Most fiduciaries work hard and do their jobs well. However, this is not always true. Sometimes fiduciaries unintentionally fail to do their jobs through neglect or incompetence. Others deliberately make decisions that will harm someone else. When a fiduciary acts wrongly - not in good faith or in the best interest of the other party - the consequences can be devastating.

If you suspect something is not right...

If a fiduciary has harmed you, what can you do? One of the most important things is to act quickly. It is generally significantly easier to protect assets than to recover them once they have been mismanaged or lost to fraud.

Many beneficiaries make the mistake of waiting to see what will happen. They sense that things are not quite right. For example, they see a trust's principal depleting more quickly than it should, or they come to realize that they are not being given full and correct information about how assets are handled. As they wait, more and more money disappears. By the time they take action, valuable assets are already gone.

You may not have to wait until the final judgment to get relief

An attorney may be able to take immediate action to stop the breach of fiduciary duty by filing a lawsuit. Once the suit has been filed, the court has broad discretion to take immediate action, permitting an injunction before final judgment in many cases, especially those relating to trusts. Injunctions are special court orders that stop people from taking certain actions. They can stop trustees from using trust assets, for example. Courts may also be able to remove a fiduciary and appoint someone else to take his or her place while the lawsuit is pending.

It is important to note that each case is different. It is impossible to make legal decisions about your case just by reading about other cases on the Internet. Even one small difference in one fact can change a case completely. That is why there is no substitute for a consultation with an experienced lawyer.

How to avoid the problem before it begins

You should also know that one of the best ways to solve problems with fiduciaries is to avoid them in the first place. When you talk with your lawyer about your estate plan, he can talk with you in depth about who you appoint as fiduciaries like guardians, executors and trustees. The decision is serious, and it requires careful consideration with an attorney's guidance. 

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