Many individuals in New Jersey may owe a “fiduciary duty” to another person without knowing which “duties” are expressly owed to the other person. A fiduciary duty arises whenever one person is chosen to manage the assets of a deceased person’s estate, manage the assets in a trust, or manage the affairs of a person who is deemed legally unable to manage their own assets. Because a fiduciary duty can arise without the realization of the person who owes the duty, a summary of the concept of fiduciary duty as that term has been interpreted by New Jersey courts may be helpful for a person who has been asked to serve as the executor of an estate or the trustee for a particular type of trust.
The basics
A fiduciary must use due care in managing the assets over which he or she has control. Due care means managing the assets solely for the benefit of the beneficiaries and avoiding even the appearance of self-dealing. An executor of an estate must use due care to locate the decedent’s assets, set values for the assets, locate all debts of the estate, and inform the beneficiaries about the value of assets and their location. An executor cannot, for example, choose to sell a valuable work of art from the estate to himself at a significantly reduces price. Such a transaction is called “self-dealing,” and any person serving as a fiduciary is absolutely forbidden from engaging in such transaction. The executor of the estate or the trustee of a trust must manage the assets solely in the interests of the estate or trust beneficiaries. A decision to sell a trust asset or invest trust assets must be made to serve the best interests of the beneficiaries. A fiduciary also has a duty to provide accurate and timely information about the assets in his care to the various beneficiaries.
Formal duties
In addition to the duties created by general common law, the state of New Jersey has created statutory duties for estate executors and probate administrators. These duties include filing the probate proceeding, assembling the assets, filing a formal inventory with the court when the probate proceeding is commenced, and filing a final inventory when all debts have been paid and the estate assets distributed to the heirs.
Compensation of the fiduciary
A person who acts as a fiduciary and properly completes all duties required of the position is entitled to reasonable compensation payable from the trust or estate assets. In the case of a fee payable to the executor of a will or the administrator of an intestate probate proceeding must be approved by the court before the fees can be paid.
Anyone who is asked to serve as a trustee or executor may wish to consult an experienced estate planning attorney for advice on the responsibilities that may be entailed in serving in a fiduciary position.