Can Beneficiaries Recover Money After a Trustee Breach in California?

If a trustee’s misconduct caused you or the trust to lose money, you may wonder whether you can recover it.

In California a beneficiary could possibly obtain financial compensation where a trustee’s breach results in a loss, enables the trustee to make a profit, or stops the trust from earning the money which it would otherwise have received.

However, proving that a trustee did something wrong is only part of the process. You also need to determine what financial harm resulted, what remedy may be available, and if the claim is collectable. 

Scott Grossman, the founder and lead attorney at the Grossman Law Firm, handles California trust cases involving beneficiaries who believe the trustee’s misconduct has reduced or threatens their inheritance.

Table of Contents

• Key Takeaways
• Can a Beneficiary Recover Money From a Trustee Breach in California?
• What Money Can Be Recovered After a Trustee Breach?
• What Types of Trustee Misconduct Can Cause Recoverable Losses?
• How Can a Beneficiary Ask the Court to Recover Trust Money?
• Does the Trustee Have to Pay the Money Back Personally?
• What Does a Beneficiary Need to Prove?
• Can a Trustee Breach Case Be Handled on Contingency?
• FAQ
• Related Resources
• How The Grossman Law Firm Can Help

• California law allows beneficiaries to seek financial remedies for certain trustee breaches.
• A court may require a trustee to restore losses caused by a breach or give up profits made through the misconduct.
• This financial liability is often called a trustee surcharge.
• Not every trustee mistake results in financial recovery. The evidence must connect the breach to the claimed loss or other available remedy.
• Potential recovery can also affect whether a trust litigation case qualifies for contingency representation.

California Probate Code § 16400 defines a breach of trust as a trustee’s violation of a duty owed to a beneficiary. 

A breach alone, however, does not necessarily mean a beneficiary receives a monetary award.

The financial consequences depend on what happened.

For example, a trustee might violate a duty by failing to provide required information. That could justify court intervention, but it may not have caused a direct financial loss. On the other hand, a trustee who sells a trust-owned house far below its fair market value may cause the trust to lose hundreds of thousands of dollars. That creates a much different recovery issue.

California Probate Code § 16440 identifies several ways a trustee may be financially responsible for a breach. Depending on the circumstances, the trustee may be charged with:

• Loss or depreciation in the trust’s value caused by the breach, plus interest. 
• Profit the trustee made through the breach, plus interest.
• Profit the trust would have earned if the breach had not caused the lost opportunity. 

These remedies focus on putting value back where it belongs rather than simply punishing the trustee.

What Is a Trustee Surcharge?

The word ‘surcharge’ is something you might hear attorneys refer to when talking about financial recovery from a trustee.

Generally, a surcharge involves making a trustee financially liable for any losses that result from misconduct or some other breach of fiduciary duty. The courts in California frequently apply the term in cases concerning trustee mismanagement and objections to trust accountings. 

For instance, where a trustee’s breach results in a loss of $250,000 in value from the trust property, a beneficiary has the right to make the trustee responsible for that loss. The court may require the trustee to pay a surcharge on top of the $250,000. 

The amount that can be recovered will depend on the evidence and on the type of remedy which the court considers to be appropriate.

Financial recovery may become an issue when a trustee’s conduct directly affects the trust’s value.

Examples can include:

• Using trust money for personal expenses
• Transferring trust assets to the trustee’s own name for personal benefit
• Allowing valuable trust property to deteriorate through neglect
• Making improper distributions that reduce another beneficiary’s share
• Keeping profits generated through self-dealing
• Mishandling investments in a way that causes a provable loss

California trustees owe beneficiaries fiduciary duties. For example, Probate Code § 16002 requires a trustee to administer the trust solely in the beneficiaries’ interests. 

The facts still matter. A disappointing investment or lower-than-expected sale price does not automatically establish a breach.

If you suspect your trustee may be violating their duties, see our guide to 20 Ways Your Trustee May Be Breaching Their Fiduciary Duties for more warning signs and examples.

A beneficiary may petition the California probate court concerning the administration of a trust under Probate Code § 17200. 

If a trustee has breached the trust, Probate Code § 16420 provides several possible remedies. Depending on the case, a beneficiary may ask the court to:

• Require the trustee to perform their duties
• Stop an ongoing or threatened breach
• Require the trustee to address a breach through payment of money or another remedy
• Remove the trustee
• Reduce or deny trustee compensation
• Trace and recover improperly disposed trust property or its proceeds 

That means financial recovery is only one potential remedy. In some cases, beneficiaries may need both repayment and a change in who controls the trust.

Potentially.

When a court imposes financial liability for a breach, the trustee may be personally responsible for restoring the loss or surrendering profits obtained through the breach.

However, liability is not automatic. Probate Code § 16440 also gives courts discretion to excuse a trustee from some or all liability when the trustee acted reasonably and in good faith, and the court finds that relief is equitable. 

This is another reason the evidence behind the trustee’s decisions matters.

A beneficiary seeking financial recovery needs more than suspicion that a trustee handled the trust poorly.

In surcharge disputes, California courts have explained that the beneficiary generally must establish the fiduciary duty, the breach, and the resulting financial loss. 

Useful evidence may include:

• Trust accountings
• Bank and investment statements
• Property appraisals
• Sale records
• Emails and text messages
• Trustee expense records
• Documents showing transfers to the trustee or related parties

TGLF can review these records to determine whether the trustee’s conduct meaningfully contributed to the financial loss.

Some California trust litigation cases may qualify for contingency representation.

The Grossman Law Firm can assess your case, the strength of the evidence, the amount at stake, the potential recovery, the trustee’s ability to satisfy a judgment or return property, applicable deadlines, and the expected cost of pursuing the case.

Not every trustee dispute qualifies. But if substantial trust assets have been lost, transferred, or misused, don’t assume paying hourly attorney fees upfront is your only option.

Contact The Grossman Law Firm today; our Intake Specialists can evaluate your case and assess your situation at no cost. Qualifying cases are eligible for a Free Phone Consultation with Attorney Scott Grossman to discuss whether your case is right for contingency.

Can a trustee be required to repay money they took from a trust?

Potentially. Probate Code §§ 16420 and 16440 allow remedies that can include recovering trust property, requiring payment of money, and holding a trustee responsible for profits made through a breach. 

Can a trustee be removed and ordered to repay money?

Yes, those are separate potential remedies. California law allows a court to remove a trustee for a breach of trust and also provides remedies for financial losses caused by trustee misconduct. 

What if I do not know exactly how much money the trust lost?

You may need trust records, accountings, appraisals, or other financial evidence before the loss amount becomes clear. Usually, records can be subpoenaed during litigation and forensic accounting made available. Not having an exact figure at the start does not necessarily mean there is no claim.

• Overview of California Trust Litigation
• 20 Ways Your Trustee Can Be Breaching Their Fiduciary Duties
• What Happens If a Trustee Does Not Follow the Trust?
• Can You Remove a Trustee for Mishandling Assets?
• Can’t Afford Hourly Legal Fees? How a Contingency Fee May Help
• Contingency Fee in California Probate and Trust Litigation
• Trust Litigation Costs in California

A trustee breaching their fiduciary duties becomes especially serious when it has reduced the value of your inheritance. If trust property has disappeared, been sold for too little, transferred improperly, or used for someone else’s benefit, contact The Grossman Law Firm today. 

Attorney Scott Grossman can review the trust, financial records, property transactions, and other evidence to determine whether the trustee’s conduct may support a claim for financial recovery and whether the matter may qualify for contingency representation.

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 to take the next step.

Our Intake Specialists can evaluate your case and assess your situation at no cost. We will schedule qualifying cases for a Free Phone Consultation with Attorney Scott Grossman.