Protecting Yourself from a Breach of Fiduciary Duty – For Principals/Beneficiaries

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Protecting Yourself from a Breach of Fiduciary Duty – For Principals/Beneficiaries

If you are a principal or beneficiary in a fiduciary relationship, learn more about how to protect yourself from a breach of fiduciary duty. A fiduciary is supposed to safeguard your important interests, such as money in a trust or your financial information. It’s vital that you know your rights to information about the fiduciary’s actions. You may have grounds for legal action due to a breach of fiduciary duty.

Principal and Beneficiary Roles in a Fiduciary Relationship

A fiduciary relationship involves at least two roles – that of fiduciary, and that of the principal or beneficiary of the fiduciary’s actions. For example, a financial advisor is a fiduciary, while the person seeking financial advice is the principal. When you form a trust, the relationship is a bit more complicated. Every trust has a settlor, who puts money or property into trust. A fiduciary called a trustee manages the trust for the benefit of beneficiaries, who ultimately receive value from the trust.

There are many other kinds of fiduciary relationships too. In all different types of fiduciary relationships, the fiduciary has certain duties prescribed by law. These duties include the duty of care and the duty of loyalty. Fiduciaries are trusted by principals to handle their affairs, including sensitive information such as finances, taxes, or legal matters. The law concerning fiduciary duties serves to hold fiduciaries to a high standard when managing these affairs.

Your Rights as a Principal or Beneficiary

Principals and beneficiaries have the right to obtain certain information about their fiduciary relationship. For example, a trustee in Texas must administer the trust in good faith according to the terms of the trust (the written document creating the trust). The trustee should provide the beneficiary with a copy of the current trust document if requested. In addition, the trustee should notify the beneficiaries of their rights under the trust, such as the right to withdraw trust income. See, e.g., Texas Trust Code § 111.0035(c). Under some circumstances, the trustee may have the obligation to perform a trust accounting if a beneficiary requests it. See Texas Trust Code § 111.0035(b)(4)(A).

These laws apply specifically to trusts, but similar laws also apply to other types of fiduciary relationships. Financial advisors have duties to disclose information to their clients, as do lawyers and accountants. Boards of directors must follow conflict of interest rules, just like other fiduciaries.

In short, your fiduciary should not be keeping you in the dark about your rights as a principal or beneficiary. You have the ability to request information about the fiduciary relationship. The fiduciary should be acting in good faith when acting for you. The fiduciary also should be acting in accordance with the trust document or other agreement you made.

Do You Suspect a Breach of Fiduciary Duty?

Sometimes, principals and beneficiaries become suspicious about a fiduciary’s actions. For example, the fiduciary might have taken one of the following steps:

  • Refusing to provide information about a beneficiary’s rights
  • Profiting personally from a transaction involving the principal’s money
  • Ignoring important questions from a principal about the fiduciary’s actions
  • Revealing confidential information without permission
  • Investing money without sufficient research

If you believe that a fiduciary acting for you has breached their fiduciary duties, you need legal advice. Our legal team handles breach of fiduciary duty cases for Houston-area clients. We can advise principals or beneficiaries about their rights. You should speak to a lawyer about your potential claim because a fiduciary’s improper acts could have serious consequences for you. You may be entitled to damages, such as repayment of lost profits or an accounting of the transactions at issue. Reach out to Henke & Williams, LLP today for a consultation.

Let Us Help

As experienced Houston litigators, we help clients facing breach of fiduciary duty situations. Every breach of fiduciary duty case has unique facts, so we tailor our advice to your unique situation. We pride ourselves on our individualized approach to legal questions. To set up a consultation, call 713-940-4500 or use our convenient Contact Form.

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