When you are the beneficiary of a trust, the trustee wields considerable power and influence over your inheritance and trust assets. But they also have several duties they must uphold, all of which serve as a crucial protection for you and other beneficiaries. Should they violate these duties, this is considered a breach of fiduciary duty. To understand what a breach could look like, let’s explore some common examples.
At Gokal Law Group, we have helped countless beneficiaries enforce their probate rights and successfully recovered millions of dollars in settlements and trial verdicts for clients. Let’s dive into common breaches of duty you might encounter.
What is a Breach of Fiduciary Duty?
When someone is entrusted with the responsibility of being a trustee, they have a legal obligation to fulfill specific duties.
Fiduciary duties encompass several key obligations and revolve around ensuring the trustee follows trust terms and acts in the best interest of beneficiaries and the trust. A breach of fiduciary duty occurs when they fail to do so.
Related Article: How Do You Prove a Breach of Fiduciary Duty?
What’s a Common Breach of Fiduciary Duty?
To better illustrate what a breach of fiduciary duty is, let’s take a look at some of the most common breaches we see at our firm. From misappropriation of assets to a failure to distribute assets, here are some of the most common examples of this offense.
“A breach of fiduciary duty can take countless forms, and these breaches often overlap. Regardless, if you are dealing with a trustee you suspect is breaching their duty, working with a trust litigation lawyer is essential to protecting your inheritance from their wrongdoing.”
– Nicholas D. Porrazzo, Partner, Gokal Law Group
Related Article: California Trust Law: Can a Trustee Be Held Personally Liable?
Misappropriation of assets
This breach of fiduciary duty occurs when the trustee takes or uses assets that do not belong to them for their benefit, like selling antiques from the estate or trust and keeping the profits. Even if they intend to pay the money back, this is a severe offense.
Related Article: What is Family Trust Embezzlement?
Conflict of interest
Trustees are supposed to always put your interests before their own. If a trustee puts their interest before those of the beneficiaries, this is a conflict of interest.
For example, if a trustee is considering two investments for a trust, and their spouse would earn a commission from one, this could constitute a conflict of interest. They should also disclose potential conflicts of interest when they arise. This transparency is crucial.
Related Article: Trustee Duties in California: Avoiding Conflicts of Interest
Self-dealing
Self-dealing is a breach of fiduciary duty that occurs when a trustee takes any action that benefits them at the expense of the beneficiaries.
For example, as a trustee, one of their duties is to invest trust assets to keep the trust profitable. But if they choose to invest assets in a start-up company that they own, this would be a clear case of self-dealing, and also a case of a conflict of interest.
Related Article: How Trust Litigation Attorneys Resolve Conflict with Self-Dealing Trustees?
Neglecting or mismanaging assets
This common breach of fiduciary duty showcases something important — these offenses don’t always involve ill intent. Failing to manage assets with the level of skill and care a reasonable person would exercise is enough to constitute a breach of fiduciary duty.
For example, imagine there is a house in the trust that they are renting out, but they fail to pay property taxes or the necessary taxes on this income or fail to collect rent. This would constitute a breach of duty.
Failure to Account
While managing assets for the trust or estate, trustees or executors must also keep a comprehensive record of all important information and transactions. They will likely have to provide this information in an accounting to you.
If they fail to provide an accounting, this is a breach of duty, and you can compel them to provide it in court. A failure to account is often the first red flag that a trustee is not acting appropriately or abusing their position, so working with an attorney is crucial.
If an accounting is inaccurate, you can also object and dispute the trust accounting with the help of a trust litigation attorney.
Related Article: Trustee Duties in California: Keeping Beneficiaries Informed
Failure to Distribute Assets
Trustees have a responsibility to distribute assets per the trust terms to beneficiaries and failing to do so or delaying distribution without reason could also constitute a breach of fiduciary duty.
Related Article: What if a Trustee Refuses to Distribute Assets?
Has a Trustee Committed a Breach of Fiduciary Duty? Let Us Help.
A breach of fiduciary duty is a severe offense that jeopardizes your inheritance, the integrity of the trust, and the legacy of the person who created it. When a trustee has committed a breach, working with seasoned trust litigation attorneys is essential.
Visit our Contact Page to schedule a free consultation and enforce your rights.
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