A trustee mistake may be minor and cause little harm. However, more serious errors can cost beneficiaries thousands of dollars, reduce their inheritance, or delay receiving assets they are entitled to.
Perhaps your trustee sold a property for less than expected, hasn’t produced financial records, or has delayed distributions without explanation.
Not every trustee mistake is a breach of trust. However, California trustees do have a duty, and some mistakes can breach fiduciary duty.
At The Grossman Law Firm, Attorney Scott Grossman represents beneficiaries throughout California in trust litigation involving trustee misconduct, financial loss, and withheld inheritances.
Understanding the difference between a mistake and a breach will help you determine whether you may be entitled to take legal action.
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Key Takeaways
- A trustee mistake does not necessarily amount to a breach of fiduciary duty.
- California trustees have a duty to act in accordance with the terms of the trust, to protect the trust assets, and to act in the interests of the beneficiaries.
- Missing money, unexplained delays, improper property sales, and conflicts of interest may indicate trustee misconduct.
- If a trustee’s actions have cost you money, you may have legal options.
- At The Grossman Law Firm, we help California beneficiaries determine whether a trustee’s mistake is serious enough to bring to court.
What Is a Trustee Mistake?
A trustee mistake occurs when someone responsible for administering a trust makes an error while managing its assets, fulfilling their duties, or distributing property to beneficiaries.
Some mistakes are administrative, such as overlooking a document or miscalculating an expense.
Others are more serious, particularly when they involve missing assets, improper transactions, or significant financial losses.
Under California Probate Code § 16000, trustees must administer trusts according to their terms and applicable law. Probate Code § 16002 also requires trustees to act solely in the beneficiaries’ interests.
A trustee who fails to meet these obligations may have committed a breach of trust, even if the conduct was not intentional.
Common Trustee Mistakes That Can Affect Your Inheritance
Some trustee mistakes are easier to recognize than others. Here are five situations beneficiaries should watch for.
1. Failing to Keep Beneficiaries Informed
A trustee stops answering questions, won’t explain expenses, or simply won’t provide the required financial information
California Probate Code § 16060 requires the trustee to keep the beneficiaries reasonably informed as to the trust and the administration thereof.
Under §16062, trustees are generally required to provide accountings to certain beneficiaries at least annually, at termination, and upon a change of trustee.
2. Selling Trust Property for Less Than Its Worth
A trustee sells an inherited house without reasonably investigating its value or sells it to someone they know for a suspiciously low price.
A below-market sale does not automatically establish misconduct. However, failing to act prudently or engaging in self-dealing may violate the trustee’s duties.
3. Using Trust Assets for Personal Benefit
A trustee transfers money into a personal account, uses trust property for unrelated expenses, or profits from transactions involving trust assets.
California Probate Code § 16004 generally prohibits trustees from using trust property for personal profit or participating in transactions that conflict with beneficiaries’ interests.
4. Delaying Inheritance Distributions Without Explanation
Trust administration takes time. Trustees may need to deal with taxes, debts, property, sales, and other matters before they can distribute assets.
However, repeated delays without a reasonable explanation may warrant closer review, especially when the trustee refuses to provide information or account for trust property.
5. Failing to Protect Trust Assets
A trustee can allow a house to go to seed, neglect the property, or fail to take reasonable steps to protect the trust investments.
These errors can reduce the trust’s value and ultimately affect what beneficiaries receive.
For more examples, explore our guide to 20 Ways Your Trustee May Be Breaching Their Fiduciary Duties.
When Does a Trustee Mistake Become a Breach of Trust?
The difference between a simple trustee mistake and a breach of trust depends on whether the trustee violated a legal duty.
For example, imagine a trustee sells a trust-owned house for $500,000, even though comparable properties suggest it was worth $700,000.
The beneficiary questions the sale.
A disappointing sale price alone does not prove wrongdoing. But if the trustee failed to investigate the property’s value, improperly favored a buyer, or personally benefited from the transaction, the circumstances may support a breach-of-trust claim.
The key questions are whether the trustee violated their duties and whether that conduct caused financial harm.
At The Grossman Law Firm, we review the trustee’s actions, the evidence, and how they affected your finances to determine whether a breach occurred.
What Can Beneficiaries Do About Trustee Mistakes?
If you suspect a trustee mistake has affected your inheritance, you may have several options.
Review the Trust and Financial Records
Trust documents, accountings, property values, and financial statements can help you see what really happened.
Identify Potential Financial Losses
Determine whether the trustee’s actions reduced the value of trust property, resulted in missing assets, or improperly affected your inheritance.
Consider Legal Action When Necessary
Under California Probate Code § 17200, qualifying beneficiaries may petition the probate court to address trust administration disputes.
Depending on the circumstances, a court may compel an accounting, review the trustee’s conduct, or consider removing the trustee.
Beneficiaries should not assume that every mistake requires litigation. However, ongoing misconduct or significant financial losses may warrant an attorney’s review.
Is a Contingency Fee Right for You?
If the trustee’s mistake has caused substantial financial damage, you may be able to take legal action. What if you can’t afford to employ an attorney?
Most attorneys charge by the hour and require a retainer upfront. These costs can add up fast, especially if your case gets complicated.
A contingency fee offers another option. Instead of paying hourly attorney fees upfront, you agree to pay your attorney a percentage of the money or property recovered if your case succeeds.
For beneficiaries whose inheritance is being withheld or diminished by trustee misconduct, this arrangement may make pursuing legal action financially possible.
What Makes a Trustee Mistake Case Qualify for Contingency?
Not every trustee mistake is worth going to court over, and not every case can be handled on a contingency basis.
At The Grossman Law Firm, we evaluate several factors when considering a case, including:
- Evidence of wrongdoing: Are there any financial records, correspondence, or other documents that would indicate that the Trustee has breached their duties?
- Significant financial harm: Did the trustee’s actions cause a meaningful loss to the trust or affect your inheritance?
- Potential recovery: Is there enough money or property to justify the cost of going to court?
- Chance of collection: Is there a realistic prospect of recovering the money or property if the case succeeds?
For example, if a trustee sells trust property for less than it is worth, you may have a claim for the loss. Whether we can handle your case on contingency depends on the evidence, the amount at stake, and other details.
At The Grossman Law Firm, Attorney Scott Grossman handles qualifying California trust litigation cases on a contingency basis.
Learn more in our guide: Contingency Fees: A Guide to California Trust and Probate Litigation.
FAQ
Can a trustee make a mistake without breaking the law?
Yes. Trustees can make administrative errors or reasonable decisions that do not produce the results beneficiaries expected. A mistake becomes a legal concern when the trustee violates their duties under California law or the trust’s terms.
Can a trustee be personally liable for a mistake?
Yes, depending on the circumstances. Under California Probate Code § 16440, a trustee who breaches the trust may be responsible for resulting losses or profits. However, courts may excuse liability in certain circumstances involving reasonable, good-faith conduct.
Can beneficiaries remove a trustee for making mistakes?
Potentially. Beneficiaries may remove a trustee for a breach of trust. However, an isolated mistake does not automatically justify removal.
Related Resources
How The Grossman Law Firm Can Help
A trustee mistake may be an isolated error or a sign of a larger problem with how your inheritance is being managed.
If a trustee’s actions have caused financial losses, delayed your inheritance, or raised concerns about potential misconduct, an attorney can help determine whether you have grounds for legal action.
At The Grossman Law Firm, we help beneficiaries and heirs throughout California enforce their rights in probate and trust litigation.
Please call us at (888) 443-6590 or complete our Get Help Now form to take the next step in protecting your inheritance.
Our Intake Specialists can evaluate your case at no cost. We will schedule qualifying cases for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published September 15, 2016