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Fiduciary Duties: Buying and Selling Stock

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According to Forbes, one of the most common mistakes made during estate administration is failing to buy or sell securities during a good market (bull market) or bad market (bear market). For estate administrators who do not have experience in the stock market, this duty can be particularly challenging. However, it is the estate administrator’s fiduciary duty to act in the best interest of the grantor or trustor. In this case, the estate administrator must make wise financial decisions in the best interest of the estate’s financial well-being. Failing to do so can end in large family disputes, great financial losses for the estate, and even a personal lawsuit against the estate administrator.

The Fiduciary Can Be Held Legally Responsible for Mistakes as Well as Intentional Wrongdoing

The estate administrator goes by many names, such as an executor as well as a fiduciary. A fiduciary is a party responsible for making decisions on behalf of another, in this case the estate. Fiduciaries have a great amount of responsibility, and can be sued for negligence as well as willful wrongdoing, such as taking money out of the estate for their own personal use. Estate administrators are, however, often paid for their services due to the time commitments that the position demands. While the estate administrator is usually privy to charging a reasonable fee, there are a variety of ways that a fiduciary can end up in hot water, according to the American Bar Association, such as:

  • Failing to pay taxes on time;
  • Filing tax returns too late;
  • Self dealing, such as buying assets for yourself or family members;
  • Allowing insurance to lapse; and of course
  • Poor investment choices.

Poor Investment Choices

The executor has an obligation to make sound investment choices. Failure in this regard includes being too conservative, favoring one beneficiary over others, and being too speculative or risky with stock purchases. Unless the will states otherwise, the executor has the ability to sell or buy securities to minimize losses, though first and foremost, it is the executor’s duty to make sure that the estate has enough money to pay for the following, and selling stock may be necessary to accomplish this:

  • Pay for funeral and burial expenses;
  • Pay debts owed, prioritizing secured debts first;
  • Pay taxes; and
  • Pay for the estate to be administered.

Call Maryland Estate Administration Attorney Tara K. Frame Today 

Our lawyers understand that not only is the responsibility of an executor difficult, but it may be something that you did not really ask for. It is time consuming, stressful, and entails making complex financial decisions including the purchase or sale of stocks. Due to the constant ebb and flow of today’s stock market, this fiduciary duty can be particularly challenging to fulfill. To safeguard yourself from blame and a potential lawsuit, we strongly encourage you to talk to an attorney before you go any further in administering your loved one’s estate. Reach out to the Pasadena law offices of Frame & Frame today at 410-255-0373 to schedule a meeting.

Resources:

forbes.com/sites/russalanprince/2017/11/06/five-mistakes-to-avoid-in-estate-administration/#59d57bb1f817

americanbar.org/groups/real_property_trust_estate/resources/estate_planning/guidelines_for_individual_executors_trustees.html

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