Trustee duties in California are legal obligations a trustee must uphold when administering and managing a trust. Failure to do so is a severe breach of their fiduciary duty. When a trustee breaches this duty, working with a premier California trust litigation lawyer is crucial to protecting your inheritance and preserving the integrity of the trust. One of the most important duties they must uphold is the duty of loyalty.
At Gokal Law Group, we have helped combat trustees who abuse their station for their gain for decades. Learn more about this breach of fiduciary responsibility in our blog.
Trustee Duties in California: What is the Duty of Loyalty?
The fiduciary duty of loyalty mandates that trustees must avoid all self-dealing practices and prioritize the interests of beneficiaries and the trust over their own.
This ranks among the most important trustee duties in California because it ensures that the trustee administers and manages the trust with the beneficiaries’ best interests in mind. Breaches of this duty can take several forms, and examples include:
- Self-dealing, such as directly stealing from the trust, charging abnormally high fees, receiving a “kickback” from investing trust assets, or failing to document all assets.
- Conflicts of interest, such as situations where fiduciaries act to benefit themselves instead of beneficiaries. These situations include delaying transferring assets to increase the fees the trustee will receive or making a loan to himself from the trust.
Sometimes, this breach is the result of incompetence. For example, maybe the trustee does not understand they must pay taxes on time, and if they fail to do so, they will have to pay interest, penalties, and the taxes they owe. This constitutes a breach of their duty to loyalty.
“We recently saw a case where a trustee decided to rent a home that was the property of a trustee to their best friend for below market value. This kind of behavior is a breach of their duty to beneficiaries and the trust because they are doing a favor for somebody else at the expense of the trust and beneficiaries. We were able to prove this in court and help the beneficiaries recover losses, remove the incompetent trustee, and protect their inheritance.” – Abbas K. Gokal, a partner at Gokal Law Group and practicing trust litigation attorney in Orange County with decades of experience in probate courts.
Unfortunately, when a fiduciary breaches these trustee duties in California, it is not always the result of incompetence. Trustees sometimes have ulterior motives. Still, even when a trustee acts dishonestly to profit from their station, it is not always easy to detect.
“We’ve represented countless beneficiaries when trustees are acting downright dishonestly. In one case litigated, a trustee hired their friends to do accounting work for the trust and produced fake receipts to double the expense and pocket the difference. In another case we litigated, a trustee sold the house to themselves for half the price it would receive on the open market. In both situations, we proved this breach of duty in court and brought these underhanded trustees to justice for beneficiaries.” – Abbas.
Several warning signs can indicate that a trustee is breaching their duty of loyalty, but the biggest red flag is when a trustee fails or outright refuses to prepare an accounting or any financial record of their dealings. An inaccurate accounting is also a major cause for concern.
Premier California Trust Litigation Lawyers
If a trustee has shown signs that they are putting their interests before those of the trust and beneficiaries, this is a severe breach of trustee duties in California, and taking swift action is essential to safeguard your inheritance and the trust.