Trust Litigation: When estate planning fiduciaries are sued in California

Fiduciaries of estate plans in California have high levels of responsibilities to those for whom they are serving.

An important issue in estate management, particularly trust management, is the fact that a successor-trustee of a trust stands as a fiduciary with respect to the beneficiaries of the trust. This is essentially always true once the trust becomes irrevocable. One of the most common issues that our trust litigation attorneys deal with at Buffington Law Firm are scenarios in which a trustee is abusing his or her position as successor-trustee by putting the trustee’s interests ahead of the interests of the beneficiaries.

Californians of any age and level of income should have an estate plan, which may include a will, power of attorney, health care directive and a trust. An estate plan helps to distribute personal items and assets acquired during the lifetime of the settlor – the person who creates the plan.

Additionally, an estate plan also identifies trusted individuals who will oversee financial, medical and continued care of family in the event he or she becomes incapacitated or upon death. Such an individual – or entity if desired – is referred to as a fiduciary. Fiduciaries have a high level of responsibility to beneficiaries of the estate plan but that relationship can create friction, and may even result in legal action.

Duties Of Fiduciaries

One of the primary benefits of having a fiduciary – an executor, trustee or successor trustee – act for the benefit of the beneficiaries of a trust is that there is less involvement by a court of law. Less oversight often means less interference, red tape and time involved making distributions and decisions on behalf of the beneficiaries.

California law has many requirements for those chosen as fiduciaries. Following are a few primary duties and responsibilities:

• Protect assets: A fiduciary has a duty to protect the assets in the settlor’s estate for the benefit of those who are to receive those assets at the time prescribed in a will or trust. For example, if a rental property is an asset of the estate, the fiduciary may have to maintain the property, find tenants and collect rents on an ongoing basis so that the asset retains its value.

• Loyalty to beneficiaries: The fiduciary must remain loyal to the beneficiaries, avoiding any actions that may provide a benefit to him or her rather than the beneficiaries.

• Fair treatment of beneficiaries: Fiduciaries must treat each beneficiary fairly despite their personal or professional relationship. An executor or trustee may also be a beneficiary so must maintain detailed accountings and records proving fair and equal treatment.

In addition, there are duties to communicate with beneficiaries on a regular basis and provide reports regarding accounting and administration matters. When a fiduciary fails to maintain the high standards required by the appointment, or a beneficiary believes the fiduciary is not fulfilling his or her responsibilities, a lawsuit against the fiduciary may arise.

Disputes With Fiduciaries

Unfortunately, disagreements often arise after the death or incapacitation of a loved one. Many types of estate disputes occur when mourning family members are forced to deal with difficult decisions or have questions about the intentions behind a settlor’s will or trust provisions.

Tensions are especially high when a person placed in a position of control over estate assets abuses his or her role, or when beneficiaries lose trust in the executor or trustee chosen by the settlor. Fiduciaries may be charged with such actions as:

• Exerting undue influence on an incapacitated settlor
• Failure to keep beneficiaries reasonably informed
• Making decisions outside the scope of his or her role
• Comingling of trust assets with personal funds
• Other types of misconduct

However, lawsuits against fiduciaries are not always based on actual misconduct. Executors and trustees have rights as well, and both sides to a dispute regarding trust administration or distribution of assets pursuant to a will are entitled to legal representation.

If you are involved in a trust contest, inheritance dispute or other estate planning or probate litigation matter, we invite you to contact our office for a free legal consultation. In this meeting, we will evaluate your situation and explain your rights and remedies to you.

Keywords: estate planning, will contest, trust dispute, fiduciary