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By: Scott Grossman on September 6th, 2022

19 ways your Trustee can be breaching their fiduciary duties

Trust Litigation arises when there is a legal dispute over a Trust document between Beneficiaries or Trustees. It can cause financial problems and domestic problems. With the help of The Grossman Law Firm, we will help you navigate your Trust Litigation journey. We will ensure the assets go to the rightful Beneficiaries and assure a Trustee is following their fiduciary duty. 

In this article, you learn all about a Trustee’s fiduciary duty. 

What a Trustee’s roles are, the rules they must adhere to continue their role, and what can happen if they do not adhere to them. 

What is a fiduciary duty? A fiduciary manages property or finances on behalf of someone else. So fiduciary duties are care, confidentiality, loyalty, obedience, and accounting. The essential duty is loyalty-ensuring your Trustee is loyal and acting impartially. 

Not knowing your Trustee’s role can cost you in the long run. It can cause not only an inheritance dispute but can affect your payout, leaving you with less money. 

In this guide, we will address and inform you on: 

  • What is the role of a Trustee? 
  • Why does a Trustee need to follow their fiduciary duties to a Beneficiary? 
  • 19 ways your Trustee can be breaching their fiduciary duties
  • Monetary and non-monetary damages for breaching duties 

What is the role of a Trustee? 

Firstly a Trustee’s duties are to hold, manage, invest, and care for the Trust’s property for the exclusive benefit of the Trust’s Beneficiaries under the terms of the Trust.

That means a Trustee must uphold the Trust in the best interest of all Beneficiaries. 

Suppose you are a Beneficiary of a Trust in California. In that case, your Trustee must administer the Trust with reasonable care, skill, and caution under California law. 

What this means is that the Trustee must adhere to an objective standard. That means they have a duty to uphold a specific Standard of Care and to deal impartially with all Beneficiaries. 

Why do they need to follow these duties? 

Under California Trust law, Trustees must fulfill specific duties. Failing to adhere to these duties can result in a claim for breach of Trust against the Trustee. 

According to PROBATE CODE SECTION 16000-16015, updated in 2010,  a Trustee must adhere to these duties to keep their role as a Trustee. Failure to do so can lead to monetary or non-monetary damages. 

Suppose your Trustee has been breaching their fiduciary duties. In that case, it can ultimately leave you with less inheritance and even more financial stress. But before we examine that, let’s identify some ways your Trustee could be breaching their fiduciary duty. 

19 ways your Trustee can be breaching their Fiduciary Duties: 

  1. Duty to Not Delegate Tasks
  2. Duty not to become a Trustee of a second Trust if that second Trust has some conflict with the First Trust
  3. Duty to administer the Trust according to its terms
  4. Duty to account
  5. Duty to separate and identify Trust Property
  6. Duty to deal impartially with all Beneficiaries
  7. Duty to invest and manage Trust Assets
  8. Duty of compensation not impacting the Standard of Care
  9. Duty to use special skills
  10. Duty to diversify Trust assets
  11. Duty to Review Trust Assets
  12. Duty to adhere to a strict standard of care
  13. Duty to manage Trust Property Productively
  14. Duty to Protect and Preserve Trust Property
  15. Duty to avoid conflict of interest
  16. Duty to Loyalty 
  17. Co-Trustee’s Duties 
  18.  Duty not to demand a release of liability 
  19. What is the Prudent Investor Rule? 

Monetary and non-monetary damages for breaching duties 

A California breach of Trust occurs when a trustee breaches a duty that the Trustee owes to a Beneficiary. Any of the following can constitute a breach of Trust:

  • When the Trustee acts in bad faith, engaging in intentional wrongdoing
  • When the Trustee acts carelessly
  • When the Trustee knowingly breaches a duty, even when done in good faith
  • When the Trustee acts outside the scope of power granted in the Trust instrument, even where a reasonable misunderstanding exists

So what is the difference between monetary and non-monetary damages?

Monetary damages

The personal representative’s breach of one or more fiduciary duties causes the estate to lose value. Further, when this happens, the personal representative pays damages. These damages are called a surcharge. A surcharge is a probate court order for compensatory damages against the Trustee. In other words, it’s the amount of money you can recover for proving the Trustee breached their duties.

You may be able to obtain double damages against the Trustee who, in bad faith, has wrongfully taken or concealed Trust property. In Probate court, you cannot get damages for any emotional harm you’ve suffered related to the improper administration of the Trust or the wrongful taking of Trust property.

Non-monetary damages 

So, what about non-monetary outcomes? Another type of outcome is called equitable relief.

The most common forms of equitable relief in Trust litigation are suspending a Trustee, removing a Trustee, and instructing a Trustee. Suspending a Trustee is a temporary relief you can get while your case is proceeding. Further, suspending a Trustee differs from removing a Trustee, though both are available for the same reasons listed above. 

You must act now if you feel your Trustee has breached their fiduciary duty. When there is a breach of a Trustee’s fiduciary duty, there is usually more than one, and that means your inheritance could be at risk. 

More on Trust Litigation and Fiduciary Duties 

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, contact us now. 

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.

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.