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When a trustee is given authority over a trust’s assets, beneficiaries may feel that they have little control over how the trust’s assets—their inheritance—are invested, distributed, or otherwise used. This is not the case. California probate law requires that a trustee follow the terms of the trust instrument and act solely in the interest of the beneficiaries; they are not permitted to use trust assets for their benefit or for purposes not laid out in the trust. This fiduciary duty means that their decision-making powers are reined in by their charge to always act in what is in the best interest of the beneficiaries.
A trustee who fails to uphold these responsibilities is said to have breached their fiduciary duty. If a trustee is simply failing to fulfill their obligations, or it is suspected they are using their position to benefit themselves, a breach of fiduciary duty has the potential to rob beneficiaries of their full inheritance. Understanding what can constitute such a breach, and what to do when it occurs, is essential for stopping any potential damage caused by one.
A breach of fiduciary duty can take many forms, and not all of them are the result of malicious intent. Administering a trust can be a complex task, even for a relatively simple estate, and some trustees may fail in their duty through inexperience or an incomplete understanding of what’s required. Others may succumb to temptation to use the assets that have been entrusted to their care to enrich themselves. Here are common examples:
| Failure to Account | Trustees must keep a record of all transactions and important information as they manage assets for a trust or estate. They will likely be required to provide this information to the beneficiaries in an accounting. Failing to do so is a breach of fiduciary duty, and they can be compelled to provide it in court. Missing or inaccurate accounting may also be the first warning signal that a trustee is acting inappropriately. |
| Failure to Distribute Assets | Failing to distribute assets per the terms of the trust, or delaying distribution without a clear and appropriate reason, can also be a breach of fiduciary duty. |
| Neglecting/Mismanaging Assets | Trustees are required to manage trust assets with the level of skill and care a reasonable person would take, and failing to do so is also a breach of their duty. This could include failing to pay taxes on property owned by the trust, or failing to diversify a trust’s stock holdings when the market changes. These are breaches that may well not involve bad intentions but are still a failure to meet a trustee’s obligations to properly administer the trust. |
| Conflict of Interest | A trustee is required to put the beneficiaries’ interests before their own rather than managing the trust for their own personal gain. For example, if making a particular investment rather than another would result in a commission or fee going to the trustee, allowing it to influence their decision would be a breach of fiduciary duty. Trustees should fully disclose any conflicts of interest when they arise. |
| Self-Dealing | This breach of fiduciary duty occurs when a trustee takes action that benefits them at the expense of the trust’s beneficiaries. As an example, this could include selling trust assets to themselves at a lower-than-market price or using trust assets to invest in their own business. |
| Misappropriation of Assets | Trustees cannot take or use trust assets for their personal benefit. Misappropriation could include taking and keeping personal property from the estate, such as jewelry, or selling it and keeping the profit. It can also include taking funds from the estate, even if the trustee’s intention is to pay the money back at some point. |
Whether committed intentionally or not, a breach of fiduciary duty is a serious offense. If you suspect a trustee is failing to fulfill their obligations, you should immediately consult an experienced estate law attorney to help uphold your rights and limit any harm.
If a trustee is failing to act in your best interest, or they are using trust assets to benefit themselves, you don’t have to watch and wait as your inheritance is diminished or withheld from you. The expert attorneys at Velasco Law Group can successfully defend your rights in court. To schedule a consultation in English or Spanish, contact us here today.
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