If you have been assigned trustee of a trust administration, you now have fiduciary duties to follow. Fiduciary duties describe the duties to act in someone else’s best interests. In this case, a trustee must always act in the best interests of the trust and its beneficiaries. The primary fiduciary duties a trustee has are the duty of care and the duty of loyalty. Trustees must act as a reasonable person would when managing the trust assets and making decisions. Similarly, trustees must remain loyal to the beneficiaries and avoid conflicts of interest or engaging in favoritism.
Meeting your fiduciary duties as a trustee may be straightforward in smaller, simple trusts. However, for larger trusts with complex assets or issues, fulfilling these duties could become complicated. Many trustees reach out to professionals like estate planning attorneys for guidance throughout this process. If you are a trustee and are feeling overwhelmed with your responsibilities, you are not alone. Our team can help you with accounting, financial management, legal advice, real estate management, and more. For a free consultation and to learn more about our services, call our office at 510-901-5375.
What Are Some Examples of Breaches of Fiduciary Duty?
If you have been assigned as a trustee, it’s important to understand what a breach of fiduciary duty entails. Sometimes, even seemingly innocuous actions can technically be a breach of fiduciary duty. In general, you must follow any instructions written in the trust agreement, which may include managing the assets in the trust, notifying beneficiaries of changes, or notifying beneficiaries of their withdrawal rights annually. If you fail to do these things, you could be accused of a breach of your fiduciary duty.
Below are some examples of potential breaches of fiduciary duty:
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Paying your bills from trust funds
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Gaining a personal advantage by investing trust assets in companies you own
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Not acting in the best interests of the beneficiaries
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Not diversifying your investments
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Deciding to invest trust assets in very risky investments
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Ignoring beneficiary requests for information
If you are unsure about your duties or are worried about breaching them unwittingly, our team can help. We can walk you through the trust agreement and go over basic fiduciary duty requirements to ensure you won’t accidentally breach your responsibilities. If you think you have committed a breach already, we can also help you protect yourself in court or through negotiations with beneficiaries. Contact our law office today for more information.
What Happens to Trustees Who Breach Their Duties?
Unfortunately, even an accidental breach of fiduciary duty can lead to litigation by beneficiaries. If you have breached your duties, it is crucial that you seek legal advice from our experienced team today. The courts take breaches of fiduciary duty very seriously, and you could face severe consequences. With our legal strategy, you can defend yourself in court and prevent further breaches in the future.
Trustees who breach their duties could face the following consequences:
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Removal or suspension from office
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Surcharge (an order to pay money to the trust)
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An order to forfeit trustee fees
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An order to restore the trust to the position it would have been in
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Denial of reimbursement for legal fees and expenses
Previous trust transactions may be voided and unwound as well. In most cases, trustees who breach their fiduciary duties face lawsuits from beneficiaries. Defending yourself against these claims can be expensive, and the cost of legal fees alone can vastly outweigh the damages that beneficiaries are seeking. If you are facing a lawsuit or need legal guidance, contact our team today.
How Do You Protect Yourself as a Trustee?
If you are a trustee of a trust, there are certain steps you can take to protect yourself from personal liability. Communicating with beneficiaries and mitigating issues proactively is essential to avoid any legal issues down the road.
Other steps you can take as a trustee include the following:
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Reading (and understanding) the entire trust agreement
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Understanding the purpose of the trust and the kinds of distributions permitted
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Appointing a professional trustee as a co-trustee, if permitted
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Seeking assistance from an experienced legal team
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Maintaining meticulous records of all decisions made and why they were made
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Delivering trust accountings to the right people
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Obtaining court or beneficiary approval for any situation where the wording of the trust agreement is unclear
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Making a note of important dates, like when beneficiaries reach a certain age for distributions
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Purchasing a trustee liability policy
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Making note of estimated payment dates, tax return due dates, and insurance premium payment dates
It’s important to remember that serving as a trustee is an optional position, and you do not have to accept a trustee role, even if you are named as a trustee in the trust agreement. However, some individuals feel pressured into accepting a trustee position to serve their family. If you are a trustee of a trust and feel overwhelmed by your responsibilities, reach out to our team today for guidance.
Should You Consult an Attorney?
Being a trustee of a trust comes with many responsibilities and duties to fulfill. Failing to meet your fiduciary responsibilities can result in legal action, which is both expensive and time-consuming. If you have never been a trustee before, it’s understandable that you may have questions about the process or feel unsure about some of your duties. That’s why our team at The Singh Law Firm is here to help you protect yourself so you can fulfill your responsibilities worry-free. We can review your trust agreement and help you create a timeline to avoid missing any steps or doing them incorrectly. For more information and to receive a free consultation, call us today at 510-901-5375.
