When the Estate Plan Goes South: Fiduciary Litigation – Beneficiary versus Trustee.

fiduciary litigationI know you have been hanging on my every word.  I know that you have been wondering what could I possibly be up to that is so important that I don’t have time for you.   I’m sorry.  I never intended to neglect you.  My only excuse is that litigation is taking up more and more of my time.

But Rob, I thought you were an estate planner!  What are you doing in litigation?   That’s an excellent question.

The answer is: Fiduciary Litigation.

What is Fiduciary Litigation you ask?  Another great question.

Well, lets start with what a fiduciary is.   When professor Robert Banks asked that question in my first year law school class, I volunteered “a bank.”  He thanked me for my good (but nevertheless incorrect—or at least not precisely correct) guess.  He was probably glad that anybody bothered to volunteer anything.

A fiduciary is someone (a person or entity) that stands in a position of trust to someone else.  Usually this relationship involves money.  Fiduciaries include agents (like under a power of attorney), business partners, Executors, Administrators, Guardians, Conservators and Trustees.  The list continues.

Trust is the most important element of what creates a fiduciary relationship. 

Fiduciary Litigation typically involves an abuse (or at least an alleged abuse) of that trust.   For instance, Dad names son as his power of attorney.  Son uses the power of attorney to change beneficiary designations on a life insurance policy to name himself.  This would be a blatant abuse.

This area of litigation has recently exploded.  An aging population combined with a growing sense of entitlement among the younger generation have created a perfect storm. 

Even the very best estate planner can only limit the likelihood of litigation.  The human element makes it impossible to eliminate it.

Sometimes a child exploit’s mom or dad’s finances during life to the detriment of not only mom and dad, but also the child’s siblings.  Now mom and dad’s other children have no inheritance.   Their sibling has already spent it (or stolen it).

Perhaps a child takes their frail parent to the child’s attorney and has the parent sign a Will that (guess what) leaves everything to that child to the detriment of his or her siblings.

Maybe one of the children is named in charge of the estate after the parent’s death and abuses that position to pay his or her personal bills or to simply steal the money.

Sometimes the abuses are less obvious, but nevertheless serious and actionable.

Sometimes the fiduciary has simply been neglectful in carrying out his or her duties.  Sometimes the fiduciary has treated one beneficiary better than the others.

The circumstances that can create the need for Fiduciary Litigation can take any number of permutations.

We see it every day.

So, dear devoted reader, I have no time for you today.  I am simply too busy with fiduciary litigation.   However, I promise to return to you as soon as I can!

Stay Tuned.

Rob Malin

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