Table of Contents
Key Takeaways
- Under the California Probate Code, trustees must administer the trust solely in the beneficiaries’ interests.
- Breaching the duty of loyalty is one of the most serious fiduciary violations and frequently involves self-dealing, conflicts of interest, or harmful mismanagement.
- Incompetence and dishonesty are two of the most common ways trustees violate this duty.
- Beneficiaries can seek trustee suspension, removal, surcharges, and, when applicable, double damages under California law.
What the Duty of Loyalty Means Under California Law
The duty of loyalty is one of the core fiduciary obligations required of any California trustee. It means the trustee must put the beneficiaries’ interests ahead of their own at all times.
If a trustee acts for their personal benefit, favors others at the beneficiaries’ expense, or makes decisions that do not serve the trust, they may be in violation of this duty.
At The Grossman Law Firm, we regularly help beneficiaries determine whether conduct crosses the line from a simple mistake into a breach of loyalty requiring court intervention.
How Trustees Commonly Breach the Duty of Loyalty
The Negligent Trustee
Sometimes the problem is not bad intentions, it is poor judgment. A negligent trustee may:
- Miss tax deadlines, causing penalties and interest
- Fail to understand basic financial responsibilities
- Rent trust property to friends or relatives for below-market rates
- Make decisions that favor others while harming beneficiaries
Even without malicious intent, negligence can still amount to a breach if it causes financial loss.
The Dishonest Trustee
A dishonest trustee misuses the trust for personal gain. These trustees may:
- Hire friends for inflated or unnecessary work
- Pocket money by submitting fabricated or inflated receipts
- Charge unreasonable management fees
- Funnel trust business to their own companies
- Refuses to provide an accounting, usually to hide misconduct
Dishonest trustees often avoid transparency because accurate financial information would reveal wrongdoing.
How to Evaluate Whether Your Trustee Is Acting Loyally
Beneficiaries can often answer one key question to assess a trustee’s loyalty:
Is this action intended to benefit the beneficiaries?
If the trustee’s decision reasonably serves the trust, even if imperfect, it may not be a breach.
If the action benefits the trustee or someone else at the beneficiaries’ expense, it likely violates the duty of loyalty.
If the action benefits the trustee or someone else at the beneficiaries’ expense, it likely violates the duty of loyalty.
Remedies When a Trustee Breaches the Duty of Loyalty
California Probate Courts provide several remedies when a trustee violates the duty of loyalty. Beneficiaries may seek:
- Suspension of the trustee to prevent further harm
- Removal of the trustee
- Surcharge, meaning a financial damages order against the trustee
- Double damages for wrongful taking of trust property under Probate Code §859
- Attorney’s fees and costs when allowed by statute
Early action is important. The sooner you respond, the more likely you are to prevent additional losses. The Grossman Law Firm regularly helps beneficiaries step in quickly to stop ongoing harm, compel proper administration, and pursue financial recovery when a trustee has breached their duty of loyalty. Our team can evaluate your situation and outline the strongest path forward so you can protect your inheritance.
If you suspect your trustee isn’t acting in your best interest, don’t wait. Explore 20 Ways Your Trustee May Be Breaching Their Fiduciary Duties to learn the most common warning signs and what you can do about them.
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 the Court Remove Your Trustee for Mishandling Assets?
- Can’t Afford a Probate or Trust Attorney?
FAQ
What is the duty of loyalty in California?
It is the trustee’s obligation to administer the trust solely for the beneficiaries’ benefit, without conflicts of interest or self-dealing.
Can incompetence be a breach of loyalty?
Yes. If incompetence results in avoidable financial harm, courts may consider it a breach of fiduciary duty.
What if my trustee won’t provide information?
Withholding information can be a sign of dishonesty. Beneficiaries can petition the court to compel an accounting or seek removal.
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. If you suspect your trustee is acting disloyally22 or refusing to explain their decisions, our team can help you evaluate your options and protect your inheritance.
Call (888) 443-6590 or fill out our Get Help Now form. Our Intake Specialists can assess your situation at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published August 14, 2023