Yes, a trustee can be held personally liable for negligence in California when their failure to fulfill fiduciary duties causes financial harm to a trust.
For example, a trustee might neglect valuable property, mishandle trust investments, or fail to protect assets from preventable losses. If that conduct breaches the trustee’s legal duties, beneficiaries may have grounds to seek financial recovery.
At The Grossman Law Firm, Attorney Scott Grossman represents beneficiaries throughout California in trust litigation involving trustee negligence, mismanaged assets, and breaches of fiduciary duty.
Table of Contents
- Key Takeaways
- Can a Trustee Be Held Personally Liable for Negligence?
- What Is a Trustee Surcharge in California?
- What Must Beneficiaries Prove to Hold a Trustee Personally Liable?
- Examples of Trustee Negligence That May Lead to Personal Liability
- What Can Beneficiaries Do If a Trustee Causes Financial Losses?
- Is a Contingency Fee Right for You?
- FAQ
- Related Resources
- How The Grossman Law Firm Can Help
Key Takeaways
- California trustees must manage trust assets with reasonable care, skill, and caution.
- A trustee may be personally responsible for financial losses caused by a breach of trust.
- A trustee surcharge can require the trustee to restore money or property lost through misconduct.
- Beneficiaries may pursue legal action when trustee negligence threatens their inheritance.
Can a Trustee Be Held Personally Liable for Negligence?
California law requires trustees to exercise reasonable care when administering a trust.
Under California Probate Code § 16040, trustees generally must act with the care, skill, and caution that a prudent person would use under similar circumstances. California’s Uniform Prudent Investor Act governs investment decisions.
If a trustee fails to meet the applicable legal standard and causes financial harm, the court may hold the trustee personally liable.
However, a poor financial outcome does not automatically prove negligence. The court considers the trustee’s actions, the circumstances, and whether the conduct caused a loss.
What Is a Trustee Surcharge in California?
A trustee surcharge is a court-ordered financial remedy that holds a trustee accountable for certain losses resulting from a breach of trust.
Instead of letting the trust absorb those losses, a surcharge may require the trustee to repay money from personal assets.
Under Probate Code § 16440, a trustee who breaches their duties may be responsible for:
- Losses or decreases in trust value resulting from the breach, with interest
- Profits the trustee improperly earned through the breach
- Profits the trust would have earned if the breach had not occurred
The court may excuse some or all liability when the trustee acted reasonably and in good faith and doing so would be equitable.
Example: A Trustee Neglects Valuable Trust Property
Suppose a trustee manages a California trust containing a rental property worth $850,000.
The property develops a serious roof leak. Despite repeated warnings, the trustee fails to arrange repairs. Water damage eventually causes $90,000 in avoidable losses.
If the trustee’s failure to act violated their duty of care, beneficiaries may seek a surcharge for the resulting damage.
The trustee could potentially become personally responsible for the loss rather than paying it from the trust.
What Must Beneficiaries Prove to Hold a Trustee Personally Liable?
To obtain a surcharge, beneficiaries generally must establish three essential elements:
- A fiduciary relationship existed. The person owed legal duties as trustee.
- The trustee breached those duties. Their action or inaction violated an applicable fiduciary obligation.
- The breach caused financial harm. The trust suffered losses connected to the misconduct.
Beneficiaries must also provide evidence supporting the amount they seek to recover.
Financial statements, property records, appraisals, repair estimates, and communications with the trustee may help establish what happened.
Examples of Trustee Negligence That May Lead to Personal Liability
Not every trustee mistake justifies litigation. However, certain conduct deserves closer examination.
Failing to Protect Trust Property
A trustee ignores necessary maintenance, lets insurance lapse, or fails to safeguard valuable assets, causing preventable losses.
Mismanaging Trust Investments
A trustee makes investment decisions without considering the trust’s purposes, risk, diversification, or beneficiaries’ needs.
California’s Uniform Prudent Investor Act establishes the applicable standard for investment and management decisions.
Improperly Using Trust Funds
A trustee uses trust money for unauthorized personal expenses or transfers assets for personal benefit.
This conduct may also violate the trustee’s duty of loyalty.
If you recognize these warning signs, read our guide, 20 Ways Your Trustee May Be Breaching Their Fiduciary Duties.
What Can Beneficiaries Do If a Trustee Causes Financial Losses?
If you suspect trustee negligence has reduced your inheritance, start by gathering available evidence.
Request the information and accountings you’re legally entitled to. Preserve communications, financial records, and documents showing the value of missing or damaged assets.
Under Probate Code § 16420, beneficiaries may seek several remedies for a breach of trust, including:
- Requiring the trustee to compensate the trust for losses
- Recovering improperly transferred trust property
- Compelling the trustee to perform their duties
- Removing a trustee when legally justified
An attorney can determine whether the evidence supports a claim and whether a financial recovery is realistically possible.
Don’t wait to protect your inheritance. Under California Probate Code, certain breach-of-trust claims have strict deadlines, depending on when the beneficiary received qualifying disclosures or discovered the misconduct.
If you suspect a trustee’s negligence has caused financial harm, contact The Grossman Law Firm. Our team can evaluate your situation and help determine whether legal action may be appropriate before important deadlines pass.
Is a Contingency Fee Right for You?
If trustee negligence has caused significant financial losses, you may have grounds for legal action. But what if you cannot afford an attorney’s hourly fees?
The Grossman Law Firm handles qualifying trust litigation cases on a contingency-fee basis, allowing beneficiaries to pursue claims without paying hourly attorney fees upfront.
Whether your case qualifies depends on the evidence, potential recovery, and ability to collect.
Learn more about your options in our guide: Contingency Fees: A Guide to California Trust and Probate Litigation.
FAQ
Can a Trustee Be Personally Liable for Investment Losses?
Yes, when a trustee breaches an applicable investment duty and causes losses. However, investments can lose value without trustee misconduct.
Does a Trustee Have to Repay the Trust for Negligence?
Potentially. A court may order repayment through a trustee surcharge if the evidence establishes a breach and resulting losses. Liability depends on the circumstances.
Can Beneficiaries Sue a Trustee for Negligence?
Yes, beneficiaries with standing may petition the California probate court for appropriate remedies when a trustee breaches their duties.
Can I Sue a Negligent Trustee Without Paying Attorney Fees Upfront?
Some cases qualify for contingency representation. An attorney will generally consider the evidence, potential financial recovery, and likelihood of collecting the money or property.
Related Resources
- Overview of California Trust Litigation
- Trustee’s Duty: What is the Prudent Investor Rule?
- How to Get Your Trustee to Distribute Your Inheritance?
- Know What You’re Getting Into: The Timeline of a Trust and Estate Lawsuit
- Can You Remove a Trustee for Mishandling Assets?
- Can’t Afford a Probate or Trust 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.
Call (888) 443-6590 or fill out our Get Help Now form.
Our Intake Specialists can evaluate your case at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published Oct 14, 2016