Among the several trustee duties in California this fiduciary must uphold, maintaining impartiality is one of the most important. When a trustee does not fulfill this obligation, it may be a breach of her or his fiduciary duty. Because the interests of current beneficiaries and future beneficiaries are often inherently at odds, trustees may have difficulty balancing these two interests, resulting in a common breach of this obligation.
This breach severely affects the trust and your inheritance and warrants working with a California trust litigation lawyer immediately. At Gokal Law Group, we have helped beneficiaries combat trustees unfairly favoring one beneficiary (or a group of beneficiaries) over the others for years. Learn more about this duty of impartiality in our blog.
Trustee Duties in California: What is the Duty of Impartiality?
Per California Probate Code section 16003, the duty of impartiality means the trustee cannot favor one beneficiary over the others.
Trustees are generally accountable to two types of beneficiaries: current and future. Fiduciaries must balance interests between the current and future beneficiaries when investing, managing, and administering the trust.
For example, future beneficiaries may be more interested in how assets grow over time, while income beneficiaries are likely concerned with what they will receive now. Trustee duties in California prohibit succumbing to pressure from beneficiaries.
In this situation, trustees cannot prioritize future investments over current distributions, or vice versa. The duty of impartiality also applies to expenses, particularly when assessing charges against the income and the principal.
If a trustee charges expenses against income that have a greater impact on current income beneficiaries, this is a breach of duty. On the other hand, if the charges are against the principal and have an inordinate effect on future beneficiaries, this is also a breach.
“A common issue is a conflict between current and future beneficiaries. Recently, we saw a case where the current beneficiaries pressured a trustee to make high-risk investments to generate high income. As the market dropped, this hurt the trust assets and the inheritance of future beneficiaries. We proved impartiality in court, held the trustee personally liable for these mistakes, and recovered the losses for the future beneficiaries.” – Abbas K. Gokal, a partner at Gokal Law Group and practicing trust litigation attorney in Orange County, CA
Still, in some situations, this duty of impartiality can be adjusted per specific language in the trust document. If the document specifically mandates favoring one beneficiary over the others, trustees must comply with these trust terms.
In some cases, however, the language in the document is too vague to interpret. When situations like these arise, the trustee has the legal license to use their best judgment when administering the trust.
Interpreting the document can be complicated and requires extensive experience and expertise, so working with a trust litigation attorney is imperative.
Premier California Trust Litigation Lawyers
If a trustee has shown signs that they are acting impartially or succumbing to beneficiary influence, this is a severe breach of trustee duties in California. Acting quickly is crucial to protect and preserve your inheritance and the trust itself. Fortunately, with the help of a premier trust litigation attorney in Orange County, you can rectify this transgression.