Understanding Fiduciary Disputes: What They Are and How to Resolve Them

Understanding Fiduciary Disputes: Simplified Strategies to Tackle Complex Legal Challenges with Confidence.

What Is a Fiduciary Dispute?

A fiduciary dispute arises when a person in a position of trust and responsibility fails to act in the best interests of another party, often resulting in financial loss or other harm. The person holding the responsibility is called a fiduciary, and they are legally and ethically obligated to act in good faith for the benefit of the beneficiary.

These disputes commonly occur in situations involving trusts, estates, corporations, and financial advisories.

Understanding Fiduciary Duty

A fiduciary duty is one of the highest standards of care in law. It means that the fiduciary must:

• Act loyally and in good faith

• Avoid conflicts of interest

• Disclose relevant information

• Exercise care, diligence, and prudence

Violating any of these principles can constitute a breach of fiduciary duty, leading to legal and financial consequences.

Common Fiduciary Relationships

Fiduciary duties exist in a wide range of personal, business, and legal contexts. Examples include:

1. Trustee and Beneficiary

• Trustees manage assets on behalf of beneficiaries.

• Common in estate planning and charitable trusts.

2. Executor/Administrator and Estate Beneficiaries

• Executors are responsible for managing and distributing the estate of a deceased person.

• Misuse of estate funds or failure to follow the will can lead to disputes.

3. Corporate Directors and Shareholders

• Directors must prioritize the interests of the corporation and its shareholders.

• Decisions favoring personal interest over corporate well-being can trigger litigation.

4. Financial Advisors and Clients

• Advisors must recommend investments that suit the client's goals and risk tolerance.

• Misrepresentation or self-dealing is a serious breach.

5. Agents and Principals

• Agents, including real estate agents or power-of-attorney holders, must act within authorized bounds.

• Unauthorized actions can lead to disputes.

What Constitutes a Breach of Fiduciary Duty?

A breach occurs when the fiduciary fails to fulfill their responsibilities. Common examples include:

• Mismanaging funds or assets

• Engaging in self-dealing or conflicts of interest

• Withholding important information

• Negligence or reckless behavior

The burden of proof typically falls on the beneficiary to show that the fiduciary:

• Owed a duty

• Breached that duty

• Caused harm or loss as a result

Legal Consequences and Remedies

If a fiduciary breach is proven, courts may:

• Order compensation for lost assets or income

• Remove the fiduciary from their position

• Impose penalties or fines

• Reverse transactions made in bad faith

Remedies aim to make the beneficiary whole and discourage future misconduct.

Real-World Example: Trust Dispute

Imagine a trustee uses funds from a family trust to invest in a business they personally own. If that investment fails, beneficiaries may allege self-dealing and sue for the amount lost. Courts could order repayment and remove the trustee.

How to Resolve Fiduciary Disputes

Resolving these disputes typically follows one of three paths:

1. Negotiation

• Direct discussions can lead to voluntary settlements

• Less costly and quicker than court

2. Mediation

• A neutral third party helps reach a mutually agreeable solution

• Preserves relationships and avoids public exposure

3. Litigation

• When resolution fails, parties may file a lawsuit

• Evidence, documentation, and expert testimony often required

Legal representation is highly recommended due to the complex and high-stakes nature of fiduciary claims.

Preventing Fiduciary Disputes

Preventive measures can help minimize the risk:

• Clearly define fiduciary duties in writing

• Conduct regular audits and performance reviews

• Maintain transparency and documentation

• Educate fiduciaries on legal obligations

FAQ: Fiduciary Disputes

What is a fiduciary?

A fiduciary is someone legally obligated to act in the best interest of another, such as a trustee, financial advisor, or corporate director.

Can you sue a fiduciary?

Yes. If a fiduciary breaches their duties and causes harm, the affected party can seek legal remedies including compensation or removal.

What proof is needed to win a fiduciary dispute?

You must show the existence of a fiduciary relationship, a breach of duty, and resulting damages.

Are fiduciary duties legally enforceable?

Absolutely. Fiduciary duties are enforceable under both state and federal laws.

Do business partners have fiduciary duties?

Yes, especially in partnerships and close corporations, where mutual trust is critical.

Fiduciary disputes can be emotionally and financially draining, but understanding your rights and obligations is the first step to resolution. Whether you're a beneficiary suspecting misconduct or a fiduciary accused of wrongdoing, legal guidance is essential.

If you're reading this because you suspect a fiduciary has betrayed your trust—or you’re unsure whether their actions are legal—you don’t have to navigate it alone.

At The Spencer Law Firm, we understand how deeply personal and financially damaging these situations can be. Our team has helped countless clients uncover the truth, recover lost assets, and hold fiduciaries accountable—all while treating you with the discretion and respect you deserve.

You have questions. You deserve answers.Let’s start with a confidential, no-pressure conversation about your rights and options.

Contact The Spencer Law Firm today to schedule a consultation and regain control of your situation—because peace of mind begins with trusted legal support.

Author: Research Team of The Spencer Law Firm –  with 15+ years of experience

Last Updated: July 2025

References:

• American Bar Association - Fiduciary Duties

• Nolo Legal Encyclopedia

• Cornell Law School Legal Information Institute