Trustee Theft

People in a position of trust or fiduciary relationship, such as in wills and living trusts, owe certain duties to their principals or employers. Trustees must act in good faith, with honesty and integrity, and in the best interests of the trust’s beneficiaries.  Here is a list of fiduciary duties owed by a trustee:

1. Duty of Loyalty – Trustee owes duty of undivided loyalty to trust beneficiaries. Trustees must act in the best interests of the beneficiaries and avoid conflicts of interest. This includes not benefiting from their position of power, such as by loaning personal funds to the trust.  The services rendered by the trustee must provide a benefit and service to the trust. The trustee may not obtain any advantage over a beneficiary by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind. The trustee must not personally enter into a transaction involving the trust property or affecting its investment or management. If the transaction is for the trustee’s personal account (self-dealing) or otherwise involves or creates a conflict between the fiduciary duties and personal interests of the trustee, unless authorized expressly or implicitly by the trust or by all of the beneficiaries, the duty of loyalty is breached.
2. Duty of Impartiality – Trustees must treat all beneficiaries fairly, regardless of whether they are current or remainder beneficiaries.
3. Duty to Avoid Conflict of Interest – The trustee has a duty not to use or deal with trust property for the trustee’s own profit or for any other purpose unconnected with the trust, nor to take part in any transaction in which the trustee has an interest adverse to the beneficiary.
4. Duty to Take Control and Preserve Trust Property – The trustee has a duty to take reasonable steps under the circumstances to take and keep control of and to preserve the trust property
5. Duty to Make Trust Property Productive – The trustee has a duty to make the trust property productive under the circumstances and in furtherance of the purposes of the trust.
6. Duty to Keep Trust Property Separate and Identified – The trustee has a duty to keep trust property separate from other property not subject to the trust and to ensure that all trust property is designated as property of the trust.
7. Duty to Enforce and Defend Actions – A trustee has a duty to take reasonable steps to enforce claims that are part of the trust property. The trustee also has a duty to take reasonable steps to defend actions that may result in losses to the trust. The standard of conduct in deciding to enforce a claim is whether a prudent trustee, in view of the likelihood of recovery and the cost of suit and enforcement, would pursue the claim.
8. Duty Not to Delegate – A trustee cannot delegate to other persons the performance of acts that can be reasonably performed by the trustee. But it is permissible to delegate duty to invest. Nor can the trustee transfer “the office of the trustee” or delegate the entire administration of the trust to a co-trustee or other person. If a trustee has properly delegated a task to an agent, co-trustee, or other person, the trustee has a duty to exercise general supervision over the person performing the delegated act
9. Duty to Account and Report to Beneficiaries – Trustees must keep beneficiaries reasonably informed about the trust and its administration.
10. Other Duties – Follow the trust language; Keep personal funds separate; Invest property in a diversified manner; Make unbiased decisions about distributions; Prepare and file tax returns; Keep trust matters confidential.

A “breach of trust” is a violation by the trustee of any duty the trustee owes one or more of the trust’s beneficiaries [Prob Code § 16400].  The applicable duties are listed above.  This definition is identical to the elements of a breach of fiduciary duty claim. The harm caused by a breach of trust may be cured by seeking remedies.

1. Compel trustee to act
2. Enjoin trustee from breaching trust
3. Set aside trustee’s act
4. Appoint receiver or trustee
5. Remove trustee
6. Reduce or eliminate trustee’s compensation
7. Impose equitable lien or constructive trust on trust property
8. Trace and recover trust properly wrongly conveyed
9. Recover economic damages, plus interest
10. If appropriate, recover punitive damages
11. If appropriate, recover emotional distress damages
12. If appropriate, recover attorney’s fees

If you are filing a claim against the Trustee for any type of mismanagement, such as breach of Trust, misappropriating Trust assets, refusing to distribute assets, refusing to follow the terms of the Trust, favoritism or unfair treatment of beneficiaries, stealing, or self-dealing, the statutory deadline is three years from the date you first had knowledge (or should have known) you had a claim in accordance with Probate Code § 16460. There is an exception to the three-year statute of limitation: sometimes Trusts have certain language that allows the Trustee to limit the time frame to 180 days after an accounting is mailed to you if the Trustee provides written notification about the shortened time frame in accordance with Probate Code § 16461(c).

However, if you are filing a claim to contest the terms of the trust (not against the Trustee for mismanagement) your time frame to initiate an action is regulated by Probate Code § 16061.7 which states:

“You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is delivered to you during that 120-day period, whichever is later.”

Do not wait until it is too late to file your lawsuit to hold a trustee accountable for the theft of trust assets.  This is a very complex process that should never be navigated by you alone.  Put to work this Office’s experience and skillset to bring your lawsuit to hold a bad trustee accountable for trustee theft.