Rushing & Guice: Providing Trustee Fiduciary Duty Litigation Services in Mississippi
When an individual is appointed as an executor of an estate or trustee of a trust in Mississippi, he/she must look after the trust in the best interests of its owner and/or beneficiaries.
This individual has the authority and obligation to act through a relationship of trust and confidence.
A trustee is considered a “fiduciary” and must act in the interests of the beneficiaries of a trust. This role must be undertaken with the utmost care and attention, or the trustee could be accused of breaching their fiduciary duty—incurring monetary liability.
Let us look a little closer at what this means.
What is a fiduciary?
“Fiduciary” is a term often used in connection with the role of an executor/personal representative of a person’s estate or the trustee of a trust. However, even the relationship between an employer and employee or an accountant and client may be considered fiduciary.
Most commonly, with trusts, the fiduciary is a nominated individual but the appointed trustees are sometimes corporate entities, such as banks.
Under Mississippi law, a fiduciary has two main legal obligations: a duty of loyalty and a duty of care. The fiduciary is expected to act in good faith, with trust, special confidence, and candor towards those for whom they are acting.
The laws and requirements are made to protect weaker parties and prevent the abuse of fiduciary power, whereby a trustee could improperly benefit by acting against the best interests of the trustor (grantor) or beneficiaries.
Trusts are often set up to benefit elderly, young or less competent/incapacitated family members, raising the stakes and increasing the potential vulnerability to harmful trustee behavior.
What is “duty of loyalty” in Mississippi?
The duty of loyalty is set out in the Mississippi Code as follows:
“A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.”
Trust assets must be managed solely in the interests of the beneficiaries and all beneficiaries must be treated with the same loyalty—ahead of self-interest. There must be no self-dealing and there is a duty to disclose material facts or conflicts of interest.
What is “duty of care” in Mississippi?
References are frequently made to the “duty of care” when considering the role of a trustee, who often has the responsibility to invest funds from the trust as part of the role.
The “prudent investor rule” in the Mississippi Code states the following:
“A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.”
All investment decisions by the trustee should be well-informed and consider the following factors:
- General economic conditions
- The role of each investment within the overall trust portfolio
- Expected risks versus returns
- Tax consequences
- The need for liquidity or income
- Possible effect of inflation/deflation
- Whether special relationships exist between certain beneficiaries and certain assets
Generally speaking, diversified assets are usually considered a more “prudent” investment strategy than a narrow portfolio of investments.
What is considered a breach of fiduciary duty in Mississippi?
Trustees often control and manage considerable assets, including cash, property, and investments. This places them in a position of great responsibility.
A breach of fiduciary duty claim may be made against executors, administrators, trustees, and personal representatives who have managed assets improperly or without the necessary duty of loyalty or duty of care.
This may simply involve the mismanagement of assets or negligently failing to protect a beneficiary’s assets. However, more serious cases may relate to stealing assets in the trust.
Grounds for filing for breach of fiduciary duty include any of the following:
- Negligence in trust management
- Incompetence in trust management
- Misappropriation or theft of trust funds
- Fraud
- Conflicts of interest or self-serving acts
- Favoring some beneficiaries over others
- Failure to account to beneficiaries or keep them informed
- Allowing a co-trustee to commit a breach
How do you prove a breach of fiduciary duty?
Breach of fiduciary duty lawsuits—like many trust litigation cases—can be complex and often involve a beneficiary or another interested party filing a lawsuit against a trustee, alleging one or more of the actions outlined above.
Proving a breach of fiduciary duty can be challenging, especially when the breach is not discovered for some time after the alleged offense. The breach may not be evident for a considerable time, particularly if the trustee fails to keep beneficiaries up to date with investment information.
Sometimes, too, the trustee is also a beneficiary. Proving a breach of fiduciary duty can be more challenging in these cases, especially if the claim is based on a trustee benefitting their own interests rather than the interests of other beneficiaries. All beneficiaries may appear to share equally in the gains or losses associated with investments.
Seasoned trust litigation attorneys are accomplished at investigating financial records and uncovering the mismanagement, theft, or misappropriation of trust funds—and proving the fault. However, it is important to alert a qualified lawyer as soon as possible after you suspect the unscrupulous trustee’s actions have led to possible losses.
To prove a breach of the fiduciary, we must prove the following four elements:
- A fiduciary relationship existed (i.e., the fiduciary owed a duty to the beneficiary)
- The fiduciary breached his/her expected duties
- The plaintiff suffered damages, and
- The damages incurred were a direct result of the breach of fiduciary duty
To be successful in such cases, considerable evidence must support the claims. Many times, these cases are settled out of court but if the case goes to trial and the judge rules in the plaintiff’s favor, damages can be recovered from the defendant.
Contact Rushing & Guice, PLLC Today
If you need to file or defend a breach of fiduciary duty claim in Biloxi or the Gulf Coast of Mississippi, contact an experienced trust litigation lawyer at Rushing & Guice, PLLC for legal advice and assistance. Call us at (228) 374-2313 or fill out our online form to arrange for a limited initial consultation. We look forward to hearing from you and look forward to the opportunity to serve as your attorneys.
