Breach of Fiduciary Duty: What It Is & How to Avoid It
Introduction
When it comes to probate and estate administration, the role of a fiduciary—often an executor or trustee—is one of the highest legal responsibilities one can hold. A fiduciary is entrusted to manage assets, pay debts, and distribute inheritances according to the law and the decedent’s wishes.
But with great responsibility comes potential risk: breach of fiduciary duty.
If a fiduciary fails to act in the best interest of the estate or its beneficiaries, they can face legal action, financial restitution, and even personal liability.
As a Certified Probate Real Estate Specialist (CPRES), I’ve worked alongside countless executors and trustees, helping them navigate their duties, avoid common pitfalls, and keep the probate process running smoothly—especially when real estate is involved. In this comprehensive guide, we’ll unpack what a fiduciary duty is, how breaches happen, and how to avoid them, so you can serve confidently and protect yourself from unnecessary litigation.
Read on, or watch our video on Youtube here.
What is a Fiduciary Duty in Probate?
A fiduciary duty is a legal and ethical obligation to act in the best interests of someone else. In the context of probate and estate administration, fiduciaries include:
✅ Executors (appointed by a will)
✅ Administrators (appointed by the court when there’s no will)
✅ Trustees (managing a trust)
These individuals are legally required to:
Manage estate assets responsibly
Act in good faith and with loyalty
Avoid conflicts of interest
Keep beneficiaries informed
Follow the terms of the will, trust, and state laws
Failing to meet these obligations—intentionally or negligently—can result in a breach of fiduciary duty.
Common Examples of Breach of Fiduciary Duty
Even the most well-intentioned fiduciaries can stumble into pitfalls. Let’s explore some of the most common examples:
1️⃣ Self-Dealing
When a fiduciary uses estate assets for their own benefit, rather than for the estate or its beneficiaries.
👉 Example: Selling estate property to themselves at a below-market price without court approval.
2️⃣ Mismanagement of Assets
Failing to maintain, insure, or properly invest estate assets, resulting in financial losses.
👉 Example: Allowing a home to deteriorate or selling valuable assets too quickly or below market value.
3️⃣ Conflicts of Interest
Putting personal interests or relationships ahead of the estate’s best interests.
👉 Example: Hiring a friend’s company for estate repairs without competitive bids, leading to overcharging.
4️⃣ Failure to Disclose Information
Withholding financial details or estate updates from beneficiaries.
👉 Example: Not providing an inventory of estate assets or not responding to reasonable requests for information.
5️⃣ Failure to Distribute Assets Timely
Unnecessary delays in settling the estate or distributing assets can raise suspicions and cause resentment.
👉 Example: Holding on to estate funds for months without explanation or cause.
Legal Consequences of Breach of Fiduciary Duty
Breach of fiduciary duty is a serious matter, with potential consequences including:
✅ Court Removal: The fiduciary can be removed from their position by the court.
✅ Personal Liability: Fiduciaries can be ordered to repay losses to the estate or beneficiaries out of their own pockets.
✅ Legal Costs: Fiduciaries may be responsible for paying their own legal fees and sometimes even the beneficiaries’ fees if found at fault.
✅ Damaged Reputation: Loss of trust among family members and in the community.
For fiduciaries, the risk isn’t just financial—it’s emotional, too. A breach can fracture family relationships and cause lasting damage to everyone involved.
How to Avoid Breach of Fiduciary Duty
The good news? With the right knowledge and support, fiduciaries can confidently manage their responsibilities and avoid these pitfalls.
1️⃣ Stay Informed
Understand your state’s probate laws and the terms of the will or trust. Ignorance is no defense.
👉 Tip: Attend estate administration workshops or consult with an estate attorney to get up to speed.
2️⃣ Maintain Transparency
Regularly communicate with beneficiaries about the status of the estate. Share inventories, accountings, and updates—even if things haven’t changed much.
👉 Tip: Schedule monthly or quarterly updates with all beneficiaries to keep them in the loop.
3️⃣ Keep Accurate Records
Document every transaction, from paying bills to distributing assets. Keep receipts, bank statements, and a detailed accounting of all financial activity.
👉 Tip: Use spreadsheets or specialized probate accounting software to simplify record-keeping.
4️⃣ Avoid Conflicts of Interest
If a potential conflict arises, disclose it immediately and, when necessary, seek court approval before proceeding.
👉 Tip: If you’re unsure whether something is a conflict, ask your attorney before taking action.
5️⃣ Seek Professional Help
No one expects you to be an expert in real estate, taxes, or investing. Surround yourself with professionals—attorneys, CPAs, and CPRES experts—to guide you.
👉 Tip: Hire a Certified Probate Real Estate Specialist (like me!) to handle estate property sales, valuations, and management.
Real Estate’s Role in Breach of Fiduciary Duty
Real estate is often the most valuable—and emotionally charged—asset in an estate. Mismanagement here is a common cause of disputes and fiduciary liability.
Common Real Estate Pitfalls
🏠 Undervaluing Property: Selling below market value or to insiders without proper appraisals.
🏚️ Neglecting Maintenance: Letting a home fall into disrepair, reducing its value.
🛑 Failing to Secure the Property: Allowing unauthorized access or leaving it uninsured.
💸 Delays in Sale: Holding property too long, causing financial strain or disputes.
As a CPRES, I specialize in:
✅ Providing accurate property valuations and appraisals.
✅ Coordinating repairs and maintenance to preserve asset value.
✅ Managing sales to ensure fair market value and court approval where needed.
✅ Helping fiduciaries document every step to avoid allegations of breach.
Case Study: Avoiding Breach Through Professional Guidance
Scenario: A personal representative inherited a rental property as part of an estate. Unsure of the property’s value or the best way to sell it, they listed it “as is” and accepted the first low offer.
Outcome: Beneficiaries challenged the sale, claiming the fiduciary failed to get a proper appraisal and sold the property below market value—a classic breach of fiduciary duty.
Solution: If the fiduciary had consulted a CPRES professional, they could have obtained a fair market appraisal, set a competitive price, and documented the entire process—avoiding liability and family conflict.
Why Fiduciaries Should Work with a CPRES
As a Certified Probate Real Estate Specialist, I bridge the gap between legal requirements and real-world real estate challenges. Fiduciaries can avoid costly mistakes by working with professionals who understand:
✅ Probate Requirements: Navigating court approvals and legal timelines.
✅ Valuation and Market Analysis: Determining accurate property values to avoid under- or overpricing.
✅ Sale Preparation: Coordinating repairs, cleanouts, and marketing.
✅ Transparent Transactions: Documenting every step to protect against breach claims.
Conclusion
Serving as a fiduciary is an honor—but it comes with legal and ethical obligations that cannot be ignored. Breach of fiduciary duty can lead to lawsuits, personal liability, and damaged relationships. But with the right knowledge, transparency, and professional support, you can confidently manage your duties and protect yourself from risk.
As a Certified Probate Real Estate Specialist, I’m here to help you navigate real estate challenges within the estate, ensuring you fulfill your fiduciary duties with integrity and care.
💬 Questions about breach of fiduciary duty or estate administration? Drop them below—I’m here to help!
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