Trustee Duties: Can Trustees treat Beneficiaries unequally?
Have you ever wondered if your Trustee has to treat all Beneficiaries similarly? Can Trustees treat Beneficiaries unequally? Are you unsure if it is suitable for different Beneficiaries to get better treatment from the Trustee than you? Have you been dealing with a Trustee who is not working impartially with you and the other Beneficiaries?
Not knowing your rights is one of the easiest ways you, as a Beneficiary, can be taken advantage of without even knowing it. Dealing with a Trustee who is not doing their responsibility, performing as an impartial Trustee, can be one of the most frustrating things. Not only can it affect your payout, but it can also affect your relationship with other Beneficiaries.
Here at The Grossman Law Firm, we have been taking pride in guiding and educating our clients for over twenty years in Trust Litigation all over California. Helping them with their rights as a Beneficiary, removing any untrustworthy Trustee, and ensuring your Trustee follows the correct standard of care.
In this article and video, you will learn:
- Should your Trustee treat Beneficiaries equally?
- Why does a Trustee have to treat Beneficiaries equally?
- What to do if your Trustee is not treating you equally?
- Know the basics of Trust Administration
Should your Trustee treat Beneficiaries equally?
The short answer is yes. A Trustee must always treat their Beneficiaries equally. If they are not treating their Beneficiaries impartially, they violate California’s Trust Law.
California Trust Law requires a Trustee to deal impartially with each Trust Beneficiary. California Trust Law says, “If a Trust has two or more Beneficiaries, the Trustee has a duty to deal impartially with them and shall act impartially in investing and managing the Trust property, taking into account any differing interests of the Beneficiaries.” That may sound straightforward, but it can sometimes be a bit complicated.
That means a Trustee must follow California’s Trust Law and the guidelines for their standard of care to stay as a Trustee. Suppose they violate California’s Trust Law, The Uniform Prudent Investor Act, or Stand of Care. In that case, they are subject to removal as Trustees.
Why does a Trustee have to treat Beneficiaries equally?
Need a little more help? Let’s simplify the law into a more 3 part overview.
The first part of the law is straightforward. The Trustee has a duty to deal fairly with the Trust Beneficiaries. That means what you would expect it to mean. The Trustee cannot take sides, cannot play favorites, and cannot act in a way that prefers one Beneficiary over another or at the expense of another Beneficiary.
The second part of this law requires the Trustee to act fair in investing and managing the trust property. That is an area that can cause trouble for trustees. Suppose the Trust needs caring for an extended time. In that case, the interest of the Beneficiaries may not clearly or easily align. Even though the Beneficiaries might want different things, the Trustee must act impartially or fairly with the Beneficiaries.
The third clause of this law requires the Trustee to consider the differing interest of the beneficiaries. There are two ways this plays out. The first is that the Beneficiaries may have differing interests by the terms of the Trust. For example, suppose the Trust has $1 million in assets. The assets are $50,000 in cash and $950,000 in a small apartment building. The trust terms call for a $100,000 specific gift to the settlor’s daughter and for the remaining assets in the Trust to be distributed equally to the settlor’s grandchildren. The particular gift takes priority over the disposition of the remainder interest. Consider the Trustee selling that apartment building or burdening it with a loan to pay that specific gift, even though the grandchildren would be unhappy. In that case, the Trustee is doing the right thing in considering the differing interest of the Beneficiaries.
As a Trustee, they must act equally or impartially with all Beneficiaries. That means they must follow California’s Trust Laws and Standard of Care to be a Trustee. If they are not in accordance with these laws, they can be subject to removal.
What to do if your Trustee is not treating you equally?
Suppose your Trustee breaches their fiduciary duty by failing to treat Beneficiaries equally. In that case, your Trustee has not kept up with their duties, and your Trust may have taken a loss.
That is why it is vital as a Beneficiary to familiarize yourself with a Trustee’s Standard of Care and if they are breaching their fiduciary duties.
A Trustee’s breach of their fiduciary duty usually results in a financial loss to you, the Beneficiary. If this is the case, evaluate what that failure has cost you. In that case, it’s time to consider taking action and removing them as a Trustee. You should first consider whether there has been any loss due to your Trustee?
If there has been any loss, you probably want to consider a petition to:
- Surcharge (i.e., get damages against) the Trustee;
- Seek prejudgment interest; and
- Seek post-judgment interest.
If you have more questions about filing a petition, check out our article, “What to Include in a Petition for Court Oversight of a Trust.”
Filing a petition can be an overwhelming sensation, making you feel anxious, annoyed, and even mad that your Trust has taken a loss. But do not worry. With the removal of your Trustee and knowledge of proper Trust administration, you can regain control of your Trust assets.
Know the basics of proper trust administration
Please review our articles on the Beneficiary’s Rights in California, Successor Trustee Tax-Related Duties, and Removing a Trustee in California. If you would still like some more information on Trust Litigation and removing a trustee, check out our complete Overview of California Trust Litigation, available on our website. And if you have more questions about your rights as a Beneficiary and what you should know moving forward.
If you are still having some trouble, have any more questions, or want to talk to someone about your case, please give us a call or fill out our Get Help Now form.
If this aligns with what’s happening to you, it’s best to reach out as soon as possible. The longer you take, the more damage your Trust could take. Please call us at (888) 443-6590, and we would be more than happy to see if we can assist you.