If you are serving as a trustee of a trust, you have many essential duties to fulfill. One of these responsibilities is to uphold the terms of a trust. Another is to discharge your obligations under the law. If you violate the law or fail to uphold the terms of a trust in any way, it likely will be considered a breach of trust. When a trust breach occurs, a probate court can impose serious consequences and penalties, including suspension or removal as trustee or being surcharged – probate for being ordered to pay money – for damages caused by the breach. In rare and extreme cases, trustees can even face criminal charges.
For this reason, trustees should always take tremendous care to fulfill their duties fully and ethically. Fo course, understanding your responsibilities under the law and adhering to the terms of a trust is the first step in helping you avoid these potentially severe repercussions.
How long does a beneficiary have to sue a trustee for breach of trust?
Under California law, a beneficiary has three years from when they knew or should have known about the breach to sue the trustee for a breach of trust, although that deadline may be shortened to 180 days if an accounting is provided that sets forth that deadline.
So when does a breach of trust occur? A breach of trust happens whenever a trustee engages in intentional or negligent conduct that harms trust assets or beneficiaries. As a trustee, you have a broad range of legal duties, and if your failure to discharge those duties causes harm you may be exposing yourself to a lawsuit for breach of trust.
The deadline for a beneficiary to file claim for breach of trust – often referred to legally as the statute of limitations – will vary between states. Whatever the timeframe, three years, 180 days, or some other time, it’s essential to remember that the statute of limitations does not start running until you are put on notice with an accounting or other disclosure or from the time the breach becomes apparent, which can be a long time from when the breach occurred.
How do you prove breach of trust or defend a breach of trust claim?
According to California Probate Code §16400, breach of trust occurs when a trustee fails to meet one of their legal duties. For example, if a trustee fails to follow the law, the terms of the trust or act in the beneficiaries’ best interest, there may be a claim for breach of trust. Trustees can also commit a breach if they commingle trust assets with their personal funds or use trust assets to benefit themselves or anyone other than the trust beneficiaries.
If a trustee has violated one or more of their duties, a beneficiary or another trustee can file a petition asking the probate court to suspend or remove the trustee and surcharge them for any harm caused by the breach. The burden of proof in this proceeding will be on the person who claims that the trustee committed a breach, who will be the “petitioner” in probate jargon. This means they will have to present sufficient evidence to show the trustee has failed to discharge a duty owed to the trust beneficiaries and that that breach caused harm.
Often, a trust accounting alone can provide enough evidence to prove or disprove a breach. However, if the accounting alone does not suffice, the petitioner and the trustee, who will be the “respondent,” can request additional documents and information from each other as well as other third-parties in a process known as “discovery.”
The type of evidence that will need to be produced will vary based on the circumstances. For example, bank statements, investment account statements, real estate sale or purchase escrow and closing documents might prove or disprove whether trust funds had been misappropriated or commingled.
Can a trustee go to jail for stealing from a trust?
Yes, a trustee can go to jail for stealing from a trust. However, this will only occur if they are convicted of a crime in a criminal court.
Under California law, stealing trust assets with a value of $950 or less is a misdemeanor with a maximum jail sentence of 6 months. Embezzling trust assets worth over $950 is considered felony embezzlement, which can lead to a trustee going to jail for up to 3 years. Under extraordinary circumstances, trustees can also be charged with other criminal offenses.
However, the reality is the vast majority of trustee thefts are handled civilly, not criminally, in probate court. Generally, police officers and district attorneys don’t have the resources to pursue criminal charges in these situations and consider these “crimes” civil disputes. So, if a beneficiary alleges a trustee is stealing from a trust, the theft is usually resolved in the probate court with the help of a trust litigation attorney.
When should I contact a trust litigation attorney?
Whether you are a trustee being accused of breach of trust or a beneficiary who believes a trustee has engaged in misconduct, you should contact a trust litigation attorney as soon as possible. Breach of trust cases are legally complex on both sides, and no matter your role in the case, an experienced trust litigation lawyer can help you gather and present the evidence you need to succeed in pursuing or defend a breach of fiduciary duty claim.
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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.