Can My sister Force the Other Heirs to Return Estate Property for a Breach of Fiduciary Duty?
Full Question:
Answer:
Executors are "fiduciaries," which means that the executor must act with the highest degree of good faith in behalf of the estate. The executor must keep his money separate from the estate's; keep detailed records concerning all transactions he engages in on the estate's behalf; not stand to profit by any transaction where the executor represents the estate's interests; and not make a gift or otherwise transfer any of the estate's money, personal property, or real estate to himself unless the will or court order explicitly states he can do so.
Various remedies may be available if a fiduciary duty was breached. Common actions for an abuse of a fiduciary duty, among others, include a petition for an accounting, claim of breach of fiduciary duty, theft, conversion, or a fraud charge.
Fiduciaries owe two main duties to their clients: a duty of loyalty and a duty of care. The duty of loyalty requires that fiduciaries act solely in the interest of their clients, rather than in their own interest. Thus fiduciaries must not derive any direct or indirect profit from their position, and must avoid potential conflicts of interest. The duty of care requires that fiduciaries perform their functions with a high level of competence and thoroughness, in accordance with industry standards.
The elements of a cause of action for breach of fiduciary duty are:
(1) Plaintiff and Defendant share a relationship whereby:
(a) Plaintiff reposes trust and confidence in Defendant, and
(b) Defendant undertakes such trust and assumes a duty to advise, counsel and/or
protect Plaintiff;
(2) Defendant breaches its duties to Plaintiff; and
(3) Plaintiff suffers damages.
The elements of a claim for breach of fiduciary duty are not fixed as the claim may arise from virtually any case where one party accepts the trust and assumes the duty to protect a weaker party.
Affirmative defenses to a claim for breach of fiduciary duty can include, but are not limited to:
(1) The passing of the statute of limitations for filing the claim.
(2) Lack of fiduciary relationship (for example, when the parties did not enter a fiduciary relationship, but rather conducted business in an arm’s length transaction there is no duty to protect the other party or disclose facts which the other party could have discovered by its own diligence.)
(3)Lack of standing
(4) Approval (for example, if the alleged actions followed full disclosure to and the consent of the Plaintiff)
(5) Business judgment rule (ex. that the corporate fiduciary's actions were motivated by a bona fide interest in the well being of the corporation where shareholders are the ones owed the fiduciary duty)
(6) Due diligence was exercised
Conversion is when someone wrongfully uses property of another for their own purposes or alters or destroys it. In an action for conversion, the taking of the property may be lawful, but the retaining of the property is unlawful. To succeed in the action, the plaintiff must prove that he or she demanded the property returned and the defendant refused to do so.
Please see the following NC statutes:
§ 28A 13 10. Liability of personal representative.
(a) Property of Estate. – A personal representative shall be liable for and chargeable in his accounts with all of the estate of the decedent which comes into his possession at any time, including all the income therefrom; but he shall not be liable for any debts due to the decedent or other assets of the estate which remain uncollected without his fault. Except for commissions allowable by law, he shall not be entitled to any profits caused by an increase in values, nor be chargeable with loss by a decrease in value or destruction without his fault, of any part of the estate.
(b) Property Not a Part of Estate. – A personal representative shall be chargeable in his accounts with property not a part of the estate which comes into his possession at any time and shall be liable to the persons entitled thereto if:
(1) The property was received under a duty imposed on him by law in the capacity of personal representative; or
(2) He has commingled such property with the assets of the estate.
(c) Breach of Duty. – A personal representative shall be liable and chargeable in his accounts for any loss to the estate arising from his embezzlement or commingling of the estate with other property; for loss to the estate through self dealing; for any loss to the estate from wrongful acts or omissions of his joint personal representatives which he could have prevented by the exercise of ordinary care; and for any loss to the estate arising from his failure to act in good faith and with such care, foresight and diligence as an ordinarily reasonable and prudent man would act with his own property under like circumstances. If the exercise of power concerning the estate is improper, the personal representative is liable for breach of fiduciary duty to interested persons for resulting damage or loss to the same extent as a trustee of an express trust. (1973, c. 1329, s. 3; 1975, c. 300, s. 4.)
§ 28A‑21‑4. Clerk may compel account.
If any personal representative or collector fails to account as directed in G.S. 28A‑9‑3, 28A‑21‑1 or 28A‑21‑2 or renders an unsatisfactory account, the clerk of superior court shall, upon his own motion or upon the request of one or more creditors of the decedent or other interested party, promptly order such personal representative or collector to render a full satisfactory account within 20 days after service of the order. If, after due service of the order, the personal representative or collector does not on or before the return day of the order file such account, or obtain further time in which to file it, the clerk may remove him from office or may issue an attachment against him for a contempt and commit him until he files said account. (C.C.P., s. 479; Code, s. 1400; Rev., s. 100; C.S., s. 106; 1933, c. 99; 1973, c. 1329, s. 3.)
§ 28A‑21‑5. Vouchers presumptive evidence.
Vouchers, without other proof, are presumptive evidence of disbursement, unless impeached. If lost, the accounting party must, if required, make oath to that fact setting forth the manner of loss, and state the contents and purport of the voucher. (C.C.P., s. 480; Code, s. 1401; Rev., s. 101; C.S., s. 107; 1973, c. 1329, s. 3.)
§ 28A‑22‑8. Executor or trustee; discretion over distributions.
Unless otherwise restricted by the terms of the will or trust, an executor or trustee shall have absolute discretion to make distributions in cash or in specific property, real or personal, or an undivided interest therein or partly in cash or partly in such property, and to do so without regard to the income tax basis for federal tax purposes of specific property allocated to any beneficiary. (1977, c. 740.)
