Family Law

Fiduciary Duty

Fiduciary duty is a legal duty to act solely in another party’s interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty to are called principals. Fiduciaries may not profit from their relationship with their principals unless they have the principals’ express informed consent. They also have a duty to avoid any conflicts of interest between themselves and their principals.

Guardianships

A guardian is a person who is entrusted with the legal care and oversight of another person, also called the ward. The guardian is usually appointed by the state, though they can also be appointed by the ward’s parents in some cases. The ward is usually a minor who needs legal guidance or an adult who cannot make legal decisions on their own, such as a person who is disabled in some manner or an elderly person.

There are two types of guardians. First, guardians of the person are entrusted with the care of the actual ward, much in the same way that an adoptive parent is responsible for a child. Secondly, guardians of the estate are entrusted with overseeing a person’s estate, which involves all of the property, money, and assets that they own. In both cases, the guardian owes a fiduciary duty to the ward.

A guardian is required by law to act in a manner that is honest and responsible when managing the ward’s financial affairs. The guardian must act in good faith and exercise sound judgment when making decisions on behalf of their ward. A guardian can sometimes be held legally responsible for the ward’s own losses, typically if the loss was the direct result of the guardian’s breach of their duties. Generally, however, the guardian is never responsible or personally liable for any debts or legal obligations that were incurred solely by the ward. The guardian should manage the ward’s finances so that their debts are addressed in a timely manner; however, the guardian usually does not need to pay for these out of their own pocket, but rather using the ward’s own funds. On the other hand, the guardian may be liable for debts associated with the ward, for example, if they arose according to a contract or other type of arrangement, such as those that were addressed in a guardianship agreement.

In some cases, guardians can receive child support payments from the ward’s non-custodial biological parent. However, this may depend on several factors. It may be that the ward’s parents have not completely forfeited their parental rights; so the guardian may only be acting in a very limited capacity and for a specific purpose. The child support order may specifically list the biological parent for the support, rather than the guardian. In any event, if the guardian is receiving child support payments for the ward, the funds need to be dedicated to the ward and not for personal use.

A few common examples of a breach of fiduciary duty by a guardian are:

• That they may be self-dealing in some way. Examples might include selling or renting property to friends or family members at a bargain rate; taking assets (cars, computers, boats) for personal use, etc;
• That they are paying themselves too much;
• That they are making poor or improper investment choices knowingly;
• That they may be intentionally pilfering or stealing assets.
• Fiduciary Duty and Guardianships in Maryland

The state of Maryland does not recognize fiduciary duty by itself. “In a claim for monetary damages at law, however, an alleged breach of fiduciary duty may give rise to a cause of action, but it does not, standing alone, constitute a cause of action.” Wasserman Goldsten Family LLC v. Kay, 197 Md.App. 586, 631–32, 14 A.3d 1193, 1219 (2011). A claim for breach of fiduciary duty exists only “where the breach is alleged as an element of the cause of action-not as a separate cause of action itself.” Boiardi v. Freestate, (D. Md. 2013). In other words, there is not independent cause of action; the breach comes from pure negligence or contract claim.

A guardianship in Maryland works in much the same way that it does in most other jurisdictions. “Before a guardianship of the person may be imposed, the petitioner must establish by clear and convincing evidence the “need” for such a guardianship.” In re Rosenberg, 211 Md. App. 305, 314, 65 A.3d 203, 208 (2013). A guardianship proceeding shall terminate upon: “(1) The cessation of the minority or disability; (2) The death or presumptive death of the minor or disabled person; (3) Transfer of all the assets of the estate to a foreign fiduciary; or (4) Other good cause for termination as may be shown to the satisfaction of the court.” Id at 209.

If there is a breach of fiduciary duty by a guardian, under Maryland Code, Estates and Trusts Title 13 – Protection of Minors and Disabled Person, Subtitle 2 – Protection of Property, Section 13-216 (a) “If the exercise of a power is improper, the guardian is liable for breach of his fiduciary duty to the minor or disabled person or to interested persons for resulting damage or loss to the same extent as a trustee of an express trust.”

In Maryland, the statute of limitations for a civil action is defined under Maryland Courts and Judicial Proceedings Article 5-101 “[a] civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.” However, there are exceptions to this rule.

These exceptions are known as tolling, which, means that the statute of limitations has been legally suspended until some event specified by law occurs. Tolling greatly benefits the plaintiff and allows for cases to be filed that otherwise would be barred due to failure to meet the statute of frauds. Various events or circumstances will toll a statute of limitations. It is tolled when one of the parties is under a legal disability—the lack of legal capacity to do an act—at the time the cause of action accrues. A child or a person with a mental illness is regarded as being incapable of initiating legal action on her own behalf. Therefore, the time limit will be tolled until some fixed time after the disability has been removed. For example, once a child reaches the age of majority, the counting of time will be resumed. A personal disability that postpones the operation of the statute against an individual may be asserted only by that individual. If a party is under more than one disability, the statute of limitations does not begin to run until all the disabilities are removed.