What Happens If a Trustee Does Not Follow the Trust?
Table of Contents
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Key Takeaways
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Understanding the Basics of Trusts in California
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Common Ways Trustees Fail to Follow the Trust
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Legal Consequences for Trustees
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What Beneficiaries Can Do
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The Legal Process for Addressing Trustee Misconduct
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Protecting the Trust and Its Beneficiaries
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Related Resources
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FAQ
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How The Grossman Law Firm Can Help
Key Takeaways
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Trustees in California must follow the terms of the trust and act in the best interests of the beneficiaries.
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Failing to follow the trust can result in legal action, removal, and personal liability.
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Beneficiaries have legal remedies, including demanding an accounting or filing for trustee removal.
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The Grossman Law Firm helps beneficiaries throughout California enforce their rights through trust litigation.
What Happens If a Trustee Does Not Follow the Trust?
Understanding the Basics of Trusts in California
A trust is a legal tool that allows a trustee to hold and manage assets for the benefit of beneficiaries, according to the instructions of the person who created the trust (the trustor). In California, trusts are commonly used to avoid probate and provide long-term financial protection for loved ones.
Types of Trusts
The responsibilities of a trustee can vary depending on the type of trust:
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Revocable Trusts: Can be changed or revoked during the trustor’s lifetime.
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Irrevocable Trusts: Typically cannot be altered after they’re created.
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Special Needs Trusts: Designed to provide for a beneficiary without affecting their eligibility for public benefits.
Regardless of the type, trustees must strictly adhere to the trust’s terms.
Common Ways Trustees Fail to Follow the Trust
1. Mismanagement of Trust Assets
Trustees must act prudently. Poor investment decisions, failure to maintain real estate, or misuse of funds can constitute a breach of fiduciary duty.
2. Failure to Distribute Assets
Trustees sometimes delay or withhold distributions without justification. When this happens, beneficiaries may suffer financial harm and emotional frustration.
3. Lack of Communication
California law requires trustees to keep beneficiaries reasonably informed. Ignoring this duty can cause suspicion and may justify court intervention.
4. Conflicts of Interest
Trustees must remain impartial. If a trustee benefits personally from their decisions, this is a conflict of interest and could be grounds for removal.
Legal Consequences for Trustees
Breach of Fiduciary Duty
If a trustee violates their legal obligations, beneficiaries can file a petition for breach of fiduciary duty. This often includes:
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Trustee removal
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Financial recovery for losses
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Court-ordered accountings
Civil and Criminal Penalties
In serious cases—such as embezzlement or fraud—trustees can face both civil and criminal penalties. Even without criminal intent, negligent actions can lead to court-imposed surcharges (financial penalties paid to the trust).
Personal Liability
Trustees who act in bad faith or with gross negligence may be personally liable for restoring trust assets or reimbursing beneficiaries.
What Beneficiaries Can Do
Demand a Formal Accounting
Beneficiaries have the right to request a formal accounting of all trust transactions. If the trustee refuses or fails to comply, the court can compel them to do so.
Petition for Trustee Removal
Grounds for removal include:
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Breach of fiduciary duty
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Incapacity or unfitness
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Persistent failure to perform required duties
California Probate Code allows beneficiaries to petition the court for trustee removal.
File a Lawsuit for Breach of Trust
If misconduct is serious, beneficiaries can file a civil lawsuit against the trustee. This legal action seeks to:
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Recover damages
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Remove the trustee
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Prevent further harm to the trust
Seek Surcharge or Damages
Beneficiaries may ask the court to impose a surcharge—a financial penalty assessed against the trustee. This ensures compensation for any financial losses caused by the trustee’s actions.
The Legal Process for Addressing Trustee Misconduct
Step 1: Gather Evidence
Keep records of all questionable activity, such as:
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Missed distributions
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Failure to provide information
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Unexplained transactions
Step 2: Consult a Trust Litigation Attorney
A California trust litigation attorney can help evaluate your claim and guide you through next steps, including filing petitions or pursuing settlement options.
Step 3: Attempt Mediation
Mediation can be a faster, less expensive way to resolve disputes. If mediation fails or isn’t appropriate, litigation may be necessary.
Step 4: File a Petition in Probate Court
A judge will evaluate the evidence and determine whether the trustee has violated their duties. If so, the court can remove the trustee, impose financial penalties, or both.
Protecting the Trust and Its Beneficiaries
Preventative Measures for Trustees
Trustees can avoid legal issues by:
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Maintaining accurate records
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Providing regular updates to beneficiaries
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Seeking professional advice (legal, tax, or financial)
The Importance of Clear Trust Documents
Well-drafted trusts reduce the chances of future disputes. While The Grossman Law Firm does not offer estate planning services, we often see how vague or ambiguous trust language contributes to litigation.
Role of a Trust Protector
Some trusts appoint a trust protector—a neutral third party with the power to oversee the trustee’s actions or even remove and replace them.
Related Resources
FAQ
What should I do if a trustee is ignoring the trust terms?
Start by requesting a formal accounting. If the trustee refuses or continues to violate the trust, you may need to consult an attorney and file a petition in probate court.
Can a trustee be removed for delaying distributions?
Yes. If the delay is unreasonable or harms the beneficiaries, it may justify trustee removal under California law.
Is a trustee personally liable for trust losses?
In cases of misconduct, bad faith, or gross negligence, trustees can be held personally liable.
How long does it take to remove a trustee?
It depends on the complexity of the case and whether there’s cooperation. Contested matters may take several months or longer.
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 to assess your situation at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.