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Fiduciary duty and California trustees

On Behalf of | Aug 1, 2018 | Firm News

Part of making a trust is appointing a trustee to administer it, which can mean various things for different types of trusts. However, the bottom line is that the trustee takes on the duty to run the trust according to the term the trustor sets and according to the interests of the beneficiaries.

The trustee’s obligation to the beneficiaries constitutes a fiduciary duty, which holds him or her to a higher degree of responsibility than simply doing one’s job. In this scenario, acting improperly or failing to take appropriate action can give the beneficiaries of the trust grounds to seek legal redress.

A trustee’s duty

When administering the assets of the trust, the trustee must prioritize the beneficiaries’ interests. Assets may include funds, real estate and more. Managing them may include coming up with a lucrative use for properties or prudently investing funds. At times, the trustee’s financial or other interests may clash with those of the beneficiaries.

What constitutes a breach

Sometimes, a trustee may, in complete good faith, make the wrong decision, which results in asset depletion. Other times, a trustee may engage in blatant misconduct such as straight-out stealing from the trust. There is a whole spectrum of actions that may fall somewhere between, especially when dealing with complex trusts and assets.

Taking care of the trust

When a trustee has to make a decision about trust assets, he or she may want to document taking proper steps to determine the best course of action. This may include consulting an appropriate professional such as an accountant or an investment advisor, or getting a qualified opinion as to the best way to interpret a confusing provision in the trust.

When a breach occurs

Beneficiaries who suspect self-dealing or other untoward behavior may be able to take legal action. They may first need to get more information, including requesting an accounting from the trustee.

It can take a long time for a fiduciary breach to come to light, and beneficiaries may learn about it only after years have passed. Acknowledging this, California law may allow beneficiaries to file an action for breach of fiduciary duty so long as the fiduciary relationship continues to exist, even if the normal three-year statute of limitations has passed.