Trustee misconduct occurs when a trustee acts with negligence or incompetence in the course of performing their duties and responsibilities as a trustee. This is also commonly referred to as a breach of fiduciary duty, because a trustee is a fiduciary tasked with managing assets held in a trust for the benefit of its beneficiaries.
There are many rules about how trustees must conduct themselves when carrying out their duties – among them are acting with competence and in good faith. Any deviation from these rules can generate personal liability for the trustee, particularly if the deviation adversely affected beneficiaries. Should a breach of fiduciary duty occur, affected parties can take legal action to hold the trustee accountable.
On What Grounds Can a Trustee Be Removed?
A trustee can be removed from their position for the same reasons they may be sued for a breach of fiduciary duty.
Common examples of these grounds include the following:
- Misappropriation or theft of trust property
- Disloyalty to trust beneficiaries
- Negligence or incompetence in trust management
- Failing to provide beneficiaries with an accurate or timely accounting of trust property
- Collusion involving one or more beneficiaries, or a third party, to the detriment of any other beneficiary
- Permitting a co-trustee to commit a breach
- Commingling the trustee’s own assets with the trust’s assets
What Is California Probate Code § 15642?
Trustees can also be removed for reasons other than a breach of fiduciary duty. California Probate Code § 15642 concerns the resignation and removal of trustees and states that a trustee can be removed when they are insolvent or otherwise unfit to administer the trust; when co-trustees are hostile to each other or can’t cooperate; when a trustee has failed or declined to act; and when the trustee’s compensation is excessive under the given circumstances.
There are other reasons why a trustee may be removed. To learn more, consult with an attorney.
What Happens If a Trustee Breaches Their Fiduciary Duty?
A breach of fiduciary duty can result in serious civil and criminal legal consequences for a trustee. In most cases, lawsuits involving a breach of fiduciary duty seek compensatory damages to recover what was lost as a result of the trustee’s wrongdoing or negligence. The goal is to make the injured beneficiaries “whole” again following the breach.
In civil lawsuits, judges can choose to impose punitive damages. These are intended to punish defendants who may have acted with egregious malice or negligence.
This is not to be confused with fines and restitution that a judge may order alongside incarceration in a criminal case. Theft or embezzlement of $950 or less is a misdemeanor punishable by up to six months in jail. Any property mishandled worth more than $950 can result in felony embezzlement charges and up to three years in prison.
Can I Sue a Trustee for Negligence?
Yes. Beneficiaries can initiate civil lawsuits against trustees when they commit a breach of fiduciary duty due to negligence. Key to these cases, however, is proving that damages occurred and need to be recovered.
How Do I Hold a Trustee Accountable?
If you need to hold a trustee accountable for misconduct, including a breach of their fiduciary duty, the first step is to consult with an experienced attorney. Chances are you’re thinking about taking legal action, but only an attorney can offer the professional insight you need to understand the legal options available to you.