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By: Scott Grossman on May 23rd, 2016

Is your trustee mismanaging your trust?

If you are concerned that the trustee of a trust is not doing a good job with asset investment, you may have a cause of action. Trustees are subject to California probate law, case law, and the terms of the trust itself in investing and managing trust assets. Be aware that California has enacted its version of the Uniform Prudent Investment Act. This imposes a “prudent investor rule” upon trustees.

Since poorly invested trust assets can directly and negatively affect you as a trust beneficiary, it is vital that you ensure the trustee is acting properly.

Is your trustee mismanaging your trust?

Steps that should be taken if mismanagement of the trust assets is suspected:

  1. Contact a trust lawyer immediately. They will help protect your legal rights as a beneficiary and enforce the trustee’s duties. Failing or delaying contact with a lawyer may result in lost trust assets.
  2. Review the provisions of the California prudent investor rule.
  3. Demand a copy of the trust instrument if you do not already have one.
  4. Demand an accounting of the trust assets by the trust terms and California probate laws.
  5. Gather information relating to any special skills that the trustee may have. These skills may be any background in finance or accounting that the trustee could have.
  6. Request information regarding any agents hired by the trustee to oversee or administer the investing of trust assets. Be sure to include the background and qualifications of the hired agents.
  7. Consider hiring a third-party investment expert to assess if the trustee’s investment decisions are reasonably suited to the trust’s risk and return objectives.
  8. Gather information related to current and previous economic conditions, inflation or deflation, and tax consequences. Along with expected rates of return relating to trust assets.

Mismanagement of trust assets is a breach of your trustee’s duties. Your trustee can be held liable for mismanaging trust assets and for a variety of other reasons that can affect the trust.

What is a breach of Trustee Duties? 

Under California Trust law, Trustees must fulfill specific duties. Failing to adhere to these duties can result in a claim for breach of Trust against the Trustee.

According to PROBATE CODE SECTION 16000-16015, updated in 2010, a Trustee must adhere to these duties to maintain their role. Failure to do so can lead to monetary or non-monetary damages.

Suppose your Trustee has been breaching their fiduciary duties. In that case, it can ultimately leave you with less inheritance and even more financial stress. But before we examine that, let’s identify some ways your Trustee could breach their fiduciary duty.

 Trustee can be breaching their Fiduciary Duties: 

  1. Duty to Not Delegate Tasks
  2. Duty not to become a Trustee of a second Trust if that second Trust has some conflict with the First Trust
  3. Duty to administer the Trust according to its terms
  4. Duty to account
  5. Duty to separate and identify Trust Property
  6. Duty to deal impartially with all Beneficiaries
  7. Duty to invest and manage Trust Assets
  8. Duty of compensation not impacting the Standard of Care
  9. Duty to use special skills
  10. Duty to diversify Trust assets
  11. Duty to Review Trust Assets
  12. Duty to adhere to a strict standard of care
  13. Duty to manage Trust Property Productively
  14. Duty to Protect and Preserve Trust Property
  15. Duty to avoid conflict of interest
  16. Duty to Loyalty 
  17. Co-Trustee’s Duties 
  18.  Duty not to demand a release of liability 
  19. What is the Prudent Investor Rule?
  20. Beneficiary’s right to get a copy of the trust

To fully understand how fiduciary duties can be breached, refer to our article, “20 Ways Your Trustee Can Breach Their Fiduciary Duties.” It offers valuable insights that are essential for protecting your interests.

More on Trustee mismanagement and fiduciary duties

If you would still like some more information on trust litigation and removing a trustee, check out our complete overview of California trust litigation, which is available on our website. If you have more questions about your rights as a Beneficiary and what you should know moving forward, contact our office today to schedule your free 30-minute phone consultation by calling us at (888) 443-6590.