Table of Contents
What Is a Breach of Fiduciary Duty in California?
Trustee Fiduciary Obligations Under California Law
- Duty of Loyalty
- Duty of Care
- Duty to Keep Beneficiaries Informed
Common Examples of Breach of Fiduciary Duty
Consequences for Trustees Who Breach Their Duties
Key Takeaways
- In California, a breach of fiduciary duty occurs when a trustee violates the legal obligations of loyalty, care, or disclosure under the Probate Code.
- Trustees must act solely in the beneficiaries’ best interests and manage trust property prudently.
- Common breaches include self-dealing, unreasonable delays in distributions, poor investment management, and withholding information.
- Beneficiaries can petition the probate court for accountings, removal of the trustee, damages, or other remedies.
Attorney Scott Grossman of The Grossman Law Firm helps beneficiaries enforce their rights and hold trustees accountable.
What Is a Breach of Fiduciary Duty in California?
A breach of fiduciary duty happens when a trustee fails to act in the best interests of the beneficiaries or violates the obligations imposed by the California Probate Code. These duties exist because beneficiaries rely on the trustee to manage assets responsibly, provide accurate information, and follow the terms of the trust.
When a trustee violates these standards through misconduct, neglect, or mismanagement, beneficiaries have the right to seek relief in probate court.
The Grossman Law Firm regularly assists beneficiaries in identifying breaches and pursuing appropriate remedies.
Trustee Fiduciary Obligations Under California Law
A trustee’s duties come directly from the California Probate Code and carry some of the highest legal standards recognized in civil law.
Duty of Loyalty
A trustee must always place the beneficiaries’ interests above their own. This prohibits:
- Self-dealing
- Conflicts of interest
- Using trust property for personal gain
- Favoring one beneficiary over another without legal authority
Duty of Care
Under Probate Code standards and the Uniform Prudent Investor Act, trustees must act with reasonable care, skill, and caution. This includes:
- Making prudent investment decisions
- Protecting and preserving trust assets
- Paying expenses appropriately
- Keeping accurate records
Duty to Keep Beneficiaries Informed
California Probate Code §§ 16060 and 16062 require trustees to keep beneficiaries reasonably informed and to provide an accounting at least once every year. Trustees must disclose:
- Financial transactions
- Asset values
- Income and expenses
- Distributions and proposed future actions
Failure to provide information is one of the most common breaches seen in trust litigation.
Common Examples of Breach of Fiduciary Duty
Although every trust is unique, certain types of misconduct regularly appear in California trust disputes.
1. Self-Dealing or Conflict of Interest
Examples include:
- Selling trust assets to themselves
- Borrowing money from the trust
- Redirecting trust opportunities for personal benefit
2. Unreasonable Compensation or Hidden Fees
A trustee cannot inflate fees, charge excessive costs, or take unauthorized “commissions.”
3. Failure to Distribute Inheritances
Common forms include:
- Delaying distributions without a valid reason
- Ignoring mandatory distribution provisions
- Using funds for personal purposes instead of beneficiary support
4. Poor Investment Management
This includes:
- Failing to diversify trust investments
- Making speculative or imprudent decisions
- Ignoring market conditions
- Not monitoring investment performance
5. Withholding Information from Beneficiaries
Examples include:
- Refusing to provide an accounting
- Not responding to reasonable information requests
- Hiding financial transactions
6. Negligence in Managing Trust Property
A trustee may breach their duty by:
- Failing to maintain real property
- Allowing assets to lose value
- Not collecting rents or income owed to the trust
7. Fraud, Misrepresentation, or Embezzlement
Deceptive conduct, whether by falsifying records, hiding funds, or misrepresenting the trust’s financial condition, is a serious breach.
For a deeper breakdown, see our related guide: 20 Ways Your Trustee Can Be Breaching Their Fiduciary Duties
Consequences for Trustees Who Breach Their Duties
When a trustee violates their fiduciary obligations, California courts may order significant remedies, including:
Personal Surcharge Liability
The trustee may be personally liable for losses arising from their actions.
Removal as Trustee
Beneficiaries can petition the probate court to remove and replace a trustee who is unfit to serve.
Monetary and Non-Monetary Damages
Courts can order:
- Repayment of lost assets
- Repayment of improper fees
- Turnover of misappropriated property
- Adjustments to beneficiary distributions
Court Orders to Prevent Further Harm
The court may restrict the trustee’s authority or appoint a neutral third party to protect the trust.
Attorney Fees and Costs
In many cases, a breaching trustee may be required to pay the beneficiaries’ legal expenses.
What to Do If Your Trustee Breached Their Fiduciary Duty
If you believe your trustee is harming the trust or withholding information, acting quickly is essential. Probate litigation is highly fact-dependent, and delay can result in lost assets.
Beneficiaries can take several steps:
1. Consult a California Trust Litigation Attorney
Speaking with an experienced attorney ensures you understand your rights and options under the Probate Code.
The Grossman Law Firm focuses exclusively on probate and trust litigation, so beneficiaries receive targeted, litigation-ready guidance.
2. Request an Accounting or Information
California law allows beneficiaries to request:
- A formal accounting
- Copies of trust documents
- Information about trust assets and transactions
3. File a Petition in Probate Court
Depending on the situation, beneficiaries may request the court to:
- Compel a trustee to account
- Suspend or remove the trustee
- Surcharge the trustee for financial losses
- Freeze trust accounts
- Appoint a third-party fiduciary
4. Seek Damages
If the breach caused losses, the court may order compensatory or punitive damages.
5. Prevent Further Misconduct
The court can issue orders to stop ongoing harm and preserve remaining trust assets.
Beneficiaries should act promptly. Trustees who breach their duties rarely improve without outside pressure, and delay can make recovery more difficult.
Related Resources
FAQ
What qualifies as a breach of fiduciary duty in California?
A breach occurs when a trustee violates their duties of loyalty, care, or disclosure under the California Probate Code or harms the beneficiaries through mismanagement, conflict of interest, or misconduct.
Can a trustee be personally liable for their misconduct?
Yes. Trustees can be personally surcharged for losses they cause and may have to repay mismanaged or misappropriated funds.
Can a trustee be removed for breach of duty?
Yes. California probate courts routinely remove trustees for neglect, self-dealing, or refusal to provide information.
Do I need an attorney to challenge a trustee?
Because trust litigation is technical and governed by strict procedural rules, beneficiaries almost always benefit from representation by an experienced California trust litigation attorney.
How The Grossman Law Firm Can Help
At The Grossman Law Firm, we help beneficiaries and heirs throughout California enforce their rights in probate and trust litigation. Attorney Scott Grossman has decades of experience holding trustees accountable and protecting trust assets.
Call (888) 443-6590 or fill out our Get Help Now form.
Our Intake Specialists can evaluate your case to assess your situation at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published January 8, 2024