The Estate and Trust Litigation Blog – New Jersey and New York

A fiduciary will be removed for breach of fiduciary duty in mishandling the assets of an estate or trust, failing to account,  or for engaging in self-dealing

As a fiduciary, an Executor of Trustee is guided by the following duties to the beneficiaries:

  1. duty of undivided loyalty;
  2. duty of impartially, a fiduciary is precluded from favoring one beneficiary over another;
  3. duty to act within the scope of his powers, to inform the beneficiaries of matters which effect the trust or estate and to administer the trust or estate solely in the interest of the beneficiaries;
  4. duty to make a full disclosure to the beneficiaries upon request; and
  5. fiduciaries must take all steps reasonable necessary for the management, protection and preservation of the estate in their possession.

The Court has authority to remove a fiduciary if he fails to account or embezzles, wastes, or misapplies any part of the estate for which the fiduciary is responsible, or abuses the trust and confidence reposed in the fiduciary.   The Court may also remove a fiduciary for acts done in breach of the trust or detrimental to the welfare of the trust, for lack of honesty or reasonable fidelity to the trust, for acts done which diminished or endangered the trust, or even to protect the trust against possible future jeopardy.

The Court is not required to wait until misconduct has actually been found, but may remove a fiduciary where it finds that such action is necessary or warranted to protect the estate or trust from future harm.  A fiduciary may also be removed where there is clear and definite proof of fraud, gross carelessness or indifference.

The Court may also remove a fiduciary where there exists mutual animosity or hostility between the fiduciary and beneficiary which interferes with the proper administration of the estate or trust, or where the confidence of the beneficiaries in the fiduciary is undermined.

While the mere existence of a conflict of interest as a fiduciary and a beneficiary does not warrant removal, if the conflict causes the fiduciary’s conduct to substantially threaten and become inconsistent with his obligations to the estate or trust, removal is warranted.  Generally, a conflict of interest justifies removal when a fiduciary obtains a financial gain from the assets he manages or misappropriates trust assets for his own use.  Removal is also justified where a fiduciary uses trust or estate assets for personal or financial gain.  The trustee is required to exercise good faith and refrain from actions which may threaten or be inconsistent with his fiduciary obligation to the estate or trust.

Ultimately, a fiduciary needs to keep in mind his obligations to the beneficiaries, must properly account to them, and must ensure there is no self-dealing.  His failure to do so subjects him to removal and surcharge.