How fiduciaries breach their duty

If you accepted the responsibility of becoming the executor of someone’s Michigan will, you become a fiduciary when that person dies and you are faced with the duties entailed in taking his or her estate through the probate process. Being a fiduciary means that you are the person who oversees and looks out for the estate’s assets, pays its bills and taxes, as well as those of the deceased person, and ultimately distributes the remaining estate assets to the people or entities designated in the deceased’s will. Sometimes you may even be one of those people yourself, but usually a testator gives the executor job to someone who is not one of his or her heirs.

It goes without saying that being a fiduciary is a big responsibility. Everything you do must be in the best interests of the estate and the best interests of its ultimate heirs. You must not do anything in your own interests and/or adverse to theirs or you breach your fiduciary duty.

Mistake versus breach

Naturally, you are human, and human beings sometimes make mistakes. The law does not expect you to be perfect as you fulfill your fiduciary responsibilities, nor can any of the heirs sue you if and when you make a simple mistake, even if it diminishes the value of the assets they ultimately will receive.

For instance, the following types of mistake do not rise to the level of a breach of your fiduciary duties:

  • Making a mathematical error in a calculation
  • Making an unwise investment with estate assets that fails to live up to its potential
  • Inadvertently failing to include a minor asset in your asset inventory
  • Selling an estate asset for somewhat less than one of the heirs thinks it was worth

Fiduciary breach elements

Rather, to prevail in a breach of fiduciary duty suit against you, any heir who sues you must prove the following four things by clear and convincing evidence:

  1. That the decedent’s will and/or Michigan law established your fiduciary relationship with the plaintiff
  2. That the decedent’s will and/or Michigan law established what duties you must perform while acting as fiduciary
  3. That you somehow breached one or more of your duties by deliberately doing something adverse to the interests of the estate or of its heirs
  4. That the plaintiff suffered damages due to your breach

Recoverable damages

Unfortunately, should a plaintiff prevail in a lawsuit against you for breach of your fiduciary duties, the court likely will require you to repay the damages the plaintiff suffered because of your breach, possibly with interest. This puts your personal assets at risk for paying whatever judgment amount the plaintiff recovers. In addition, if the court finds that what you did or did not due constituted a particularly egregious breach of your fiduciary duties, it could assess punitive damages against you as well as actual damages.