Trustees are considered to be fiduciaries, so they are held to the highest legal standard. Given the duties and responsibilities that fiduciaries must satisfy, there are various grounds for filing a lawsuit against a trustee. Negligent behavior that constitutes a breach of their fiduciary duty is one of these reasons.
At RMO, the most common reasons we see trustees being sued include:
- Failing to comply with trust instructions.
- Being unable to perform their duties.
- Exposing trust property to foolish and unnecessary risks.
- Wasting trust property.
- Commingling personal assets with trust assets.
- Benefiting personally from trust assets.
- Making questionable gifts using trust funds.
- Fraud, coercion, forgery, or duress.
- Embezzlement or theft of trust property.
If you believe you may have reason to sue a trustee, you should consult with a reputable trust litigation attorney to determine the best course of action for your situation. Even if a lawsuit to recover damages is not a possibility, you may be able to petition the probate court to have the trustee removed and order them to pay money damages.
What is negligence or breach of fiduciary duty?
Negligence can constitute a breach of fiduciary duty because trustee misconduct can include a range of conduct, both intentional and unintentional (or negligent), committed by a trustee that results in loss to trust assets. Trustee malfeasance can be grounds for removing a trustee or filing a suit against them.
Breach of Fiduciary Duty
A breach of fiduciary duty occurs when a person who is acting in a position of trust and confidence, such as a trustee or attorney, violates the duties they owe to the principal, in this case the trust. The law states that trustees must act solely in the trust beneficiaries’ best interests.
As fiduciaries, the legal duties of trustees include:
- Prioritizing the interests of the beneficiaries over their own.
- Acting in good faith towards the beneficiaries.
- Treating all beneficiaries fairly and with care and respect.
- Managing trust assets reasonably.
- Being honest and open about pertinent information.
A trustee can breach their fiduciary duty by failing to fulfill any of the legal obligations they owe.
Trustee negligence is a type of breach of fiduciary duty that stems from a lack of attention, ability, or care, as opposed to an intentional breach. While offenses such as fraud or embezzlement involve malicious, self-serving behavior on the trustee’s part, negligence usually occurs because a trustee was simply careless or potentially even unaware of their duties as a trustee. However, an unintentional breach of fiduciary duty is still an actionable breach, and beneficiaries can sue a negligent trustee for any damages suffered because of a failure.
What happens when a trustee violates the trust?
If a trustee violates the terms of a trust, California Probate Code §15642 permits them to be removed as allowed by the trust document or by the probate court.
Examples of removal trustee violations include:
- Failing to administer the trust according to the trust document.
- Failing to act in the beneficiaries’ best interest.
- Failing to treat all beneficiaries fairly.
- Failing to keep beneficiaries informed.
- Using trust assets for the trustee’s own benefit.
- Wasting trust assets.
- Commingling trust property with personal assets.
- Failing to enforce claims or defend against legal actions involving the trust.
When a trustee violates one or more of these duties, they may have committed a breach of trust that can result in their removal as trustee. If a beneficiary or co-trustee files a petition to have a trustee removed, the probate court will schedule a hearing to evaluate each side’s arguments. The court can determine whether the trustee should be suspended or removed permanently and confirm the successor trustee or appoint a replacement, or it can find that the trustee did not violate the trust and leave the current trustee in place. Sometimes, the court will also order a negligent trustee to pay money damages, court costs, and legal fees.
When should I contact a trust litigation attorney?
If you are considering suing a trustee for negligence, you should contact a trust litigation attorney immediately to discuss your situation. An experienced trust litigation lawyer will be able to review the circumstances of your case and evaluate if a lawsuit or a trustee removal action is a viable course of action.
Have questions? We’re happy to discuss.
Call (424) 320-9444 or email firstname.lastname@example.org
Can Trustees Be Held Personally Liable?
About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.