Individuals set up trusts for many reasons, including helping to care for their loved ones by passing down assets in a controlled manner. Part of creating a trust is naming the trustee who will ensure that the assets are managed properly and that they are distributed according to the terms of the trust.
A person who’s named as trustee has very specific responsibilities they must uphold. These responsibilities are called fiduciary duties, which are a legal obligation to act in the best interests of the client when managing the trust and its assets. A trustee must act with care, good faith and loyalty at all times and avoid negligence or self-dealing.
What happens when fiduciary duties are breached?
A trustee has a fiduciary relationship is with the beneficiaries of a trust. By doing things that aren’t in the best interests of the beneficiaries, however, the trustee can cause the value of the trust to decrease. This means that the beneficiaries will receive less from the trust than they would have if the trustee had upheld their fiduciary duties.
For example, a trustee could refuse to sell a home placed in the trust when selling is what’s best for the beneficiaries. Even worse, the trustee could misappropriate substantial sums of money from trust assets. Actions such as these involve breaching fiduciary duties. Making reckless investments without due diligence as to the likely return is another example.
Ensuring that a trust or estate plan is handled in the proper manner is important, if sometimes underappreciated, work so the heirs and beneficiaries get what they’re due. Litigation is sometimes necessary to meet that goal, but doing this swiftly is critical since there’s so much at stake. Working with someone who’s familiar with these situations can help you to get a plan together so you can get what your loved one intended you to have.