USA Law and Practice Contributed by: Diana Zeydel, Marc Selden, Benjamin Babcock and Brian Smith, Greenberg Traurig, LLP
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Service by corporate and institutional trustees is com - mon in the US, when representing high net worth fami - lies who have concerns about the capacity of benefi - ciaries to manage wealth, long-term administration of assets and complex asset management. Corporate fiduciaries may serve in multiple capacities, including as trustees of private trusts and as administrators of an estate. Generally, corporate and professional trustees are held to a higher standard of care than their non-profession - al counterparts. Corporate and professional trustees are deemed to possess specialised skills, judgment and expertise, and are expected to use those skills in executing their fiduciary services. A corporate or professional fiduciary is generally evaluated pursuant to an elevated standard of care based upon a reason - able or prudent professional in the field, as opposed to the standard of care imposed on a non-professional counterpart. 6.2 Fiduciary Liabilities A fiduciary is generally not liable for the obligations of the trust, estate or entity for which the fiduciary is act - ing, absent malfeasance. Fiduciaries have custodial duties and are expected to act in good faith and in the best interests of the beneficiaries. Where a fiduci - ary acts in contravention to the best interests of the beneficiaries, whether it be by self-dealing, a breach of a duty of loyalty, or not exercising reasonable care, such fiduciary may be held responsible for any result - ing losses. Trust instruments or other entity documents often contain exculpatory provisions to protect fiduciar - ies from liability. It is generally not possible to waive the obligation to act in good faith. Fiduciaries may delegate certain responsibilities, such as investment management, tax and legal compliance, real estate management and the like, to third-party professionals. In the case of a delegation, the fiduciary is obligated to select the agent prudently, properly define the scope of such delegation, and monitor the agent periodically.
being transferred, those who are disinherited may be more inclined to commence litigation to dispute the estate plans of their elders. Wealth disputes are driven both by the desire to shift wealth transfers from one beneficiary to another and the desire to control the administration and ultimate disposition of wealth. In terrorem clauses may be used in wills and trusts to disincentivise challenges to estate planning documents. Enforcement of such clauses varies from state to state, but in some states probable cause for the dispute may overcome the effectiveness of such a clause. Therefore, choice of law is an important factor in the employment of such clauses. Certain jurisdictions allow the commence - ment of a pre-mortem probate action that permits estate planning documents to be validated while the creator is still living. Generally, a probate contest requires a showing of incapacity or undue influence. Capacity to create tes - tamentary documents generally requires an individual to understand the nature and extent of the individ - ual’s assets and the natural objects of the individu - al’s bounty and to be able to relate those two things together to formulate an estate plan. Undue influence typically involves a showing that the individual was in a weakened or dependent state such that the undue influencer had the ability to cause the individual to deviate from what would otherwise have been the In the US, damages or settlement payments in wealth disputes may take the form of distributions from trusts, payments from individuals, and even more broadly reformation or modification of estate planning docu - ments. Care should be taken to analyse the potential income and wealth transfer tax consequences of the resolution of any dispute. individual’s desired plan of disposition. 5.2 Mechanism for Compensation The courts’ goal in determining damages is typically to restore all parties to the position in which they would have been absent any wrongdoing.
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