A trustee is a fiduciary, which means that they have a legal duty to act in the best interests of the trust’s beneficiaries. A “breach of trust” occurs when a trustee violates their fiduciary duties.
In general, trustees have a duty to act in the best interests of the beneficiaries, to manage the trust property prudently, and to keep accurate records. If a trustee violates any of their duties to the trust’s beneficiaries, they have likely committed a breach of trust.
Under California law, a trustee’s duties to the beneficiaries include:
- Adhering to the terms of the trust instrument.
- Acting in the best interest of the trust and its beneficiaries.
- Treating all beneficiaries fairly and impartially.
- Avoiding the use of the trust for the trustee’s own benefit.
- Keeping trust assets segregated.
- Enforcing legal claims involving the trust or trust property.
- Defending legal actions against the trust.
According to California Probate Code §16400, a trustee who violates any of these duties has committed a “breach of trust.”
How Do You Handle a Breach of Trust?
If you are a beneficiary of a trust, there are several things you can do if you believe that the trustee has perpetrated a breach of trust.
Under California Probate Code §16420, if a trustee commits a breach of trust, or even threatens to commit a breach of trust, a beneficiary or co-trustee can ask the probate court to take any of the following actions:
- Compel the trustee to perform their duties.
- Enjoin the trustee from committing a breach of trust.
- Compel the trustee to redress a breach of trust by payment of money or otherwise.
- Appoint a receiver or temporary trustee to take possession of the trust property and administer the trust.
- Remove the trustee from their position.
- Set aside acts of the trustee.
- Reduce or deny the trustee’s compensation.
- Impose an equitable lien or a constructive trust on trust property.
- Trace trust property that has been wrongfully disposed of and recover the property or its proceeds.
Additionally, California Probate Code §16440 states that if a trustee commits a breach of trust, they can be “surcharged” (required to pay) any of the following amounts:
- Any loss or depreciation in value of the trust estate resulting from the breach of trust, with interest.
- Any profit made by the trustee through the breach of trust, with interest.
- Any profit that would have accrued to the trust estate if the loss of profit is the result of the breach of trust.
However, a trustee may also be required to pay “exemplary” or “punitive” damages where there is evidence that the breach of trust involved oppression, fraud or malice. Punitive damages are additional compensation meant to punish the trustee for particularly reprehensible behavior.
Who Can Sue for Breach of Trust?
California Probate Code §16420 states that any beneficiary or co-trustee can file a petition alleging breach of trust in the probate court. This section provides important protections for beneficiaries and co-trustees by ensuring that they can seek relief from the court if the trustee poses a threat to the trust.
What Is the Sentence for Breach of Trust?
Although some breaches of trust are criminal offenses, a trustee can only receive a jail sentence for a breach of trust if they are convicted of a crime in a criminal court.
Under California law, embezzlement of trust property worth $950 or less is a misdemeanor with a maximum sentence of 6 months imprisonment. Stealing trust assets valued at over $950 is a felony offense, which can carry a jail sentence of up to 3 years.
However, the majority of breaches of trust are handled as civil matters in probate court rather than criminal prosecution. Typically, police departments and district attorneys just don’t have sufficient resources to pursue criminal charges in these situations.
For this reason, if a beneficiary or co-trustee alleges that a trustee has misappropriated trust assets, the issue is typically resolved in the probate court with the assistance of a trust litigation attorney. It is rare for a trustee to be charged criminally and receive a jail sentence for breaches of trust, even if they have stolen or misused trust property for their own benefit.
Have questions? We’re happy to discuss.
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Read More
What Is a Breach of Fiduciary Duty Lawsuit?
Can Trustees Be Held Personally Liable?
The Trustee’s Guide to Trust Distributions
The Trustee’s Guide to Avoiding Trustee Removal
About RMO, LLP
RMO LLP provides personal and efficient inheritance dispute services to individual and institutional clients. The firm’s attorneys focus on probate litigation involving contested trust, estate, probate, and conservatorship matters. Serving California and Texas, with offices in Los Angeles, Pasadena, Orange County, San Diego, Fresno, the Bay Area, Dallas, and Houston. For more information, please visit https://rmolawyers.com/.
