Abusing Your Position of Trust
Disputes that arise in the context of estate administration, trust administration, powers of attorney, guardianships, and elder law make up the area of law known as fiduciary litigation. You are likely wondering what exactly “fiduciary litigation” means. A “fiduciary” is a person in a position of trust. For example, you may be a fiduciary because you have been designated as an agent in someone’s power of attorney. “Litigation” is the type of work attorneys do to resolve disputes through the court system. Thus, fiduciary litigation involves disputes that arise as a result of a person abusing their position of trust.
Trust is a powerful thing. It involves trading power for vulnerability. To trust another is to be confident in the other person’s motives and to be assured that the other person will act to ensure your safety and promote your welfare. This type of trust relationship is formally recognized by the law, and the law imposes significant obligations on those who hold positions of trust. A fiduciary has a legal obligation to put the other person’s interests ahead of his/her own. In fact, a fiduciary can be held liable and can be forced to pay damages for failing to meet these obligations.
Certain types of recognized fiduciary relationships include husband/wife, attorney/client, doctor/patient, real estate agent/client, trustee/beneficiary, principal/agent, guardian/ward, personal representative/heir. The courts have been reluctant to specifically define “fiduciary relationship,” but the NC Supreme Court has stated, “A relationship of trust and confidence ‘exists in all cases where there has been a special confidence reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence.’” Abbitt v. Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931); Compton v. Kirby, 158 N. C. App. 19, 581 S. E. 2d. 452 (2003).
While it is a blessing to have people in our lives that we trust, all too often, these very individuals abuse that trust. Not surprisingly, abuses of trust generally stem from financial ill-motives. Some individuals who abuse positions of trust convince themselves that they deserve the money, the estate, or the property because they provided some type of service to the principal, ward, or beneficiary. They convince themselves that they are acting in the principal’s best interests, convince themselves that mom and dad wanted them to inherit the entire estate, convince themselves that they are entitled to a fee for the care they provided, convince themselves that they deserve the property and/or money because they were the better child, the better sister, the more-involved parent, etc. People can easily believe what they want to believe when money is involved.
Breach of fiduciary duty is a cause of action brought against fiduciaries who abuse their power. Those who mismanage funds, co-mingle funds, mismanage property, engage in self-dealing, abuse authority, act negligently, or fail to account can be held responsible.
Many claims are often pled in conjunction with breach of fiduciary duty. Common law fraud, fraud in the inducement, constructive fraud, conversion, negligence, gross negligence, negligent misrepresentation, unjust enrichment, and breach of contract, among other claims, may also be pled against those who abuse their positions of trust.
Sometimes, those who engage in deception or exploitation are not fiduciaries. If the law does not recognize the abuser as a fiduciary, all is not lost. Many of the claims mentioned above can be pled against those individuals to obtain the return of property and damages.
There are times that actions need to be taken to stop the bleeding before making the appropriate claims to recover property. Several types of actions can be implemented to shut down the abuser/exploiter. Depending on the situation, these actions may include guardianships or conservatorships, protective orders or no contact orders, petitions for accounting, eviction actions, separation/divorce actions, freezing accounts, and petitions for removal of a fiduciary such as an agent/guardian/conservator/trustee/personal representative.
Additionally, many times, the abuser/exploiter will act inappropriately to obtain a position of trust. This is often the first step and paves the way for the exploiter to steal funds and property. For example, a deceptive or manipulative child may convince their elderly/vulnerable parent to designate the child as agent in the parent’s power of attorney, to rewrite their will allowing the child to inherit the entire estate, to designate the child as trustee, to designate the child as beneficiary on insurance policies or bank accounts, to retitle property, or even to turn over property and/or money for “safe-keeping.” The list goes on and on. Actions to correct this type of behavior include allegations of undue influence, duress, fraud, incapacity, will caveats (will challenges), petitions for removal, and actions to recover property. Rebecca McNerney practices in North Carolina and South Carolina in the areas of estate litigation, fiduciary litigation, family law, and certain criminal defense matters. If you are experiencing any of the above or similar situations, contact Rebecca McNerney to immediately shut down the actions of the abuser and protect assets before they become unrecoverable.Specifically, Rebecca practices in Mecklenburg County, NC, Union County, NC, York County, SC, and Lancaster County, SC.
DISCLAIMER: Yes, I am an attorney, but I’m not your attorney and your reading of this article does not create an attorney-client relationship between you and me. I am licensed to practice law in North Carolina and South Carolina, and I have based the information in this article on the laws of those two states and the United States. This blog contains general legal information only and should not be taken or relied upon as legal advice. All cases are unique and require a detailed analysis. Additionally, the laws are everchanging which causes certain pieces of article content to become outdated. You should consult with an attorney before you take any action in reliance on this information.
