How Do You Protect Yourself As a Trustee?

How do you protect yourself as a trustee? The first step is to take the time and learn more about what you are signing up for.  Do your research, ask questions, consult a trust attorney, and ensure you understand the duties and obligations that need to be fulfilled as trustee. Your legal liabilities can be high if you don’t take the time to understand the risks and responsibilities involved in serving as trustee.

To ensure you are protected, you must fulfill your legal duties and obligations. If you violate your duties to the trust and its beneficiaries, you can be removed as trustee, or in some cases, sued

A few steps you can take to protect yourself as a trustee include:

  • Read, understand, and comply with the terms of the trust instrument.
  • Keep records of trust transactions, how you spend your time, and the reasons for your decisions.
  • Retain a trust attorney to assist with the administration of the trust.

Is a trustee protected?

A trustee has the protections afforded under the trust and at law, but if you are found to be in breach of trust or if you violate your fiduciary duty to trust beneficiaries you can be held personally liable for any loss

As a trustee, you must follow the terms of the trust. If you violate the trust, even accidentally, you might find yourself on the wrong end of a lawsuit. Trustees may also be sued for issues like mismanaging trust property, conflicts of interests, embezzlement, or even failing to account or keep beneficiaries informed. 

To protect yourself as a trustee, you should work with an experienced trust attorney to ensure you are discharging your legal duties.

What happens when a trustee does not follow the trust?

If a trustee does not follow the trust, they may be subject to removal for breach of trust. 

Under California Probate Code §15642, a trustee may be removed as provided for in the trust, usually where beneficiaries have a right to remove and replace a truste, or the probate court can remove a trustee on its own motion or upon the request of a settlor, co-trustee, or beneficiary.

Breach of trust is one of the most common reasons that trustees are removed. Under California Probate Code §16400, a breach of trust may occur when the trustee violates one of their duties, such as: 

  • The duty to comply with the terms of the trust instrument.
  • The duty to treat beneficiaries fairly and act in their best interest.
  • The duty to maintain trust property separate from personal property.
  • The duty to avoid using trust property for their own benefit.

If a trustee has failed to meet one or more of their obligations, a beneficiary or another trustee can petition the probate court to request that the trustee be removed and surcharged for any damage caused by the breach. Once the petition for removal is filed (often preceded by a petition for suspension if warranted), the court will schedule a hearing to determine whether the trustee should be removed. At that hearing all interested parties – i.e. beneficiaries, heirs, co-trustees, and/or successor trustees – have an opportunity to state their position.  Depending on the gravity of the allegations and evidence, the judge may suspend the trustee and appoint a replacement trustee pending determination on the removal petition at a later hearing or trial.  At that later time the court also may order the trustee to pay money damages to the trust or the beneficiaries in some situations, as well as legal fees and court costs, what is known as a “surcharge” in probate parlance.

When should I contact a trust litigation attorney?

The best way to protect yourself is to contact a probate lawyer or trust attorney as soon as you consent to serve as trustee. An experienced trust lawyer can help you ensure you fulfill your legal obligations and avoid taking actions that could subject you to personal liability. 

Even if you didn’t retain an attorney when you began serving as trustee, a trust litigation lawyer can help you at any time an issue arises. If you’ve been accused of wrongdoing such as breach of trust, you should contact a trust litigation attorney as soon as possible to discuss your options and, possibly, avoid or at least manage your potential liability. 

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Have questions? We’re happy to discuss.

Call (424) 320-9444 or email hello@rmolawyers.com

Read More

The Trustee’s Guide to Trust Distributions

The Trustee’s Guide to Avoiding Trustee Removal

The Guide to Trustee Succession and Resignation

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.