Introduction

A trustee is a person or entity responsible for managing and administering the assets of a trust. A trust is a legal arrangement that allows a person (the settlor) to transfer their assets to another person (the trustee) to hold and manage for the benefit of one or more people (the beneficiaries). The trustee has a fiduciary duty to the beneficiaries, which means they must act in the best interests of the beneficiaries at all times.

Trustee Duties in California

California law imposes several duties on trustees. These duties include:

• Duty of loyalty: California Probate Code Section 16002 - The trustee must act in the best interests of the beneficiaries and avoid any conflicts of interest.

• Duty of care: California Probate Code Section 16040 - The trustee must exercise reasonable care and skill in managing the trust assets.

• Duty of impartiality: California Probate Code Section 16041 - The trustee must treat all beneficiaries fairly and impartially.

• Duty of confidentiality: California Probate Code Section 16003 - The trustee must keep the trust assets confidential and avoid disclosing any confidential information about the trust to unauthorized persons.

• Duty to keep accurate records: California Probate Code Section 16060 - The trustee must keep accurate records of all trust transactions and provide these records to the beneficiaries upon request.

What Happens if a Trustee Breaches Their Duties

If a trustee breaches their duties, they may be held personally liable for any losses that the trust beneficiaries suffer as a result. The beneficiaries may also be able to have the trustee removed from their position and replaced with another trustee.

Some common examples of trustee breaches of duty include:

• Self-dealing: The trustee uses the trust assets for their own personal benefit.

• Commingling: The trustee mixes the trust assets with their own personal assets.

• Negligence: The trustee fails to exercise reasonable care and skill in managing the trust assets.

• Imprudent investments: The trustee makes investments that are not in the best interests of the beneficiaries.

• Failure to distribute trust income: The trustee fails to distribute trust income to the beneficiaries in a timely manner.

Causes of Action Against a Trustee

Beneficiaries who believe that a trustee has breached their duties may have several causes of action against the trustee. Some of the most common causes of action include:

• Accounting: California Probate Code Section 16060 - The beneficiaries may demand that the trustee provide an accounting of all trust transactions.

• Breach of fiduciary duty: California Probate Code Section 16420 - The beneficiaries may sue the trustee for breach of fiduciary duty if the trustee has acted in their own personal interests or failed to exercise reasonable care and skill in managing the trust assets.

• Removal: California Probate Code Section 17200 - The beneficiaries may petition the court to remove the trustee from their position if they have breached their duties.

• Surcharge: California Probate Code Section 16420 - The beneficiaries may sue the trustee for surcharge to recover any losses that the trust has suffered as a result of the trustee's breach of duty.

Recent California Cases

Here are some notable California cases involving trustee malfeasance:

• Estate of Gilmaker (1962) 57 Cal.2d 627: The California Supreme Court held that the trustee breached their fiduciary duty by favoring one beneficiary over another. The trustee's actions included making distributions and decisions that disproportionately benefited one beneficiary, to the detriment of the others. The court emphasized that a trustee must act impartially and fairly towards all beneficiaries, and failing to do so constitutes a breach of fiduciary duty.

• Estate of Giraldin (2012) 55 Cal.4th 1058: The California Supreme Court held that remainder beneficiaries could sue a trustee for breaches of fiduciary duty (e.g., imprudent investments) committed during the settlor's lifetime after the settlor's death. The trustee invested trust assets in a company he partly owned, which became nearly worthless, breaching the duty of care and potentially the duty of loyalty.

• Sterling v. Sterling (2015) 242 Cal.App.4th 185: The Court of Appeal upheld the removal of a trustee due to incapacity, which impaired his ability to manage trust assets (the Los Angeles Clippers) prudently. The court found that the trustee's failure to competently administer the trust constituted a breach of the duty of care, justifying his removal.

• Vale v. Union Bank (1979) 88 Cal.App.3d 330: The Court of Appeal found that the trustee engaged in self-dealing, breaching the duty of loyalty. The trustee was held liable for losses to the trust, including interest, and the court noted that punitive damages could be imposed for egregious breaches.

FAQ: Trustee Malfeasance in California

1. How can I tell if a trustee is breaching their duties?
Look for signs such as self-dealing (using trust assets for personal benefit), commingling trust and personal assets, failing to provide accountings, making risky or imprudent investments, or favoring one beneficiary over others. If something feels wrong, request trust records and consult a trust litigation attorney.

2. What can I do if I suspect trustee malfeasance?
You can demand an accounting (Probate Code § 16060), petition the court to remove the trustee (§ 17200), or sue for breach of fiduciary duty or surcharge (§ 16420). Contact an experienced trust litigation attorney to evaluate your case and gather evidence, such as financial records or witness statements.

3. What is the statute of limitations for suing a trustee in California?
For breach of fiduciary duty, you have up to four years from when the breach is discovered or reasonably should have been discovered. For contesting a trust's validity (e.g., due to undue influence), you have 120 days from receiving statutory notification after the settlor's death. Consult an attorney promptly to avoid missing deadlines.

4. Can a trustee be held personally liable for losses?
Yes, a trustee can be personally liable for losses caused by their breach of duty, such as through negligence, self-dealing, or fraud. Courts may order a surcharge to compensate the trust or require the trustee to repay losses from personal funds.

5. Can a trustee face criminal charges for malfeasance?
In severe cases, such as embezzlement of trust funds, a trustee may face criminal charges. For example, embezzling $950 or less is a misdemeanor with up to 6 months in jail, while over $950 can lead to felony charges with up to 3 years in jail.

Conclusion

If you are a beneficiary of a trust and you believe that the trustee has breached their duties, you should consult with an experienced trust attorney to discuss your legal options. An attorney can help you to understand your rights and take the necessary steps to protect your interests.

Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal advice. Trust law can be complex and varies based on specific circumstances. You should consult with a qualified trust litigation attorney to obtain advice tailored to your situation. The author and publisher are not responsible for any actions taken based on this information.