Serving as an executor, guardian, or trustee imposes special responsibilities under Texas law. Our Dallas-based attorneys often work in estate, trust, and probate disputes that may involve fiduciary issues. In this blog post, we briefly explore fiduciary litigation.
Posted: February 24, 2016
Damages in Fiduciary Litigation
Serving as an executor, guardian, or trustee means that you are a fiduciary – you are taking care of property that does not necessarily belong to you. As a fiduciary, your conduct is scrutinized and held to the highest standard under Texas law. Serving as a fiduciary means that sometimes you might feel as though you have a target on your back. What can a fiduciary do to try to lessen the burden? The short answer is always to act in the beneficiaries’ best interest.
A fiduciary must ensure that her conduct adheres to the fiduciary duties required. Those duties are discussed further on our website and include the duties of loyalty, full disclosure, competency, and the duty to exercise reasonable discretion.
When a fiduciary is sued, the court will look at the fiduciary’s conduct. Were the fiduciary’s actions the result of laziness or just simply an honest mistake? Texas law calls the fiduciary’s actions a “standard of conduct.” The standard of conduct can affect the types of damages an unhappy beneficiary might be entitled to receive.
“Bad faith” is a standard of conduct that can increase the types of damages available significantly. Bad faith occurs when a fiduciary acts knowingly or intentionally in a way that is adverse to the interest of a beneficiary, when the fiduciary has an improper motive.
On the other hand, “good faith” occurs when a fiduciary subjectively believes her defense is viable and her conduct is reasonable in light of existing law. Good faith generally exists where a fiduciary acts with honest intention. Predictably, a finding of good faith can help to put a cap on some of the available damages.
Negligence occurs when a fiduciary failed to take appropriate action without having an improper motive. Negligence is divided into “gross negligence” and “reckless indifference.” Gross negligence is when the fiduciary should have known better (or did know better) than to take a particular action, but went ahead and did it anyway. Reckless indifference, however, occurs when a fiduciary consciously disregards risky conduct and engages in the conduct despite the unreasonableness of it. Degrees of negligence can also affect the damages awarded to a successful beneficiary.
A fiduciary’s conduct is of very high importance. It is essential that every fiduciary always uphold the fiduciary obligations entrusted to him, acting reasonably and in good faith always.
Being a fiduciary can seem to be a daunting task. In some cases, the fiduciary fails to execute his or her duties to the requirements of the law. If you are having issues in terms of a trust, estate, probate or other type of dispute that may involve issues of fiduciary duty, please reach out to one of the attorneys working in our Dallas, Texas, office. We offer a free consultation and can help begin to discover the real legal issues in play.