Trustee Breaches
A trust is an effective tool for passing assets to the next generation when someone dies. Trusts are under the care and control of the trustee, who is supposed to make sure the assets are handled appropriately and distributed according to the instructions in the trust. When this doesn’t happen as expected, it can be a breach. It’s important for heirs to know what a breach is and what to do if they discover a breach so they can get the assets designated to them through the trust.
What Does it Mean When Fiduciary Duty is Breached?
When a trust is created, it includes directions for how it is to be handled to ensure the assets are available to be passed down to the heir. With some trusts, the heir will receive the assets right away, but with others, there may be restrictions. If a trustee does not care for the trust appropriately, uses the assets in the trust for their own benefit, or otherwise doesn’t follow the instructions for the trust, it can be considered a breach.
The action taken for a trustee breaching their fiduciary duty can vary depending on what has happened, but often the remedy is to file a lawsuit and force the trustee to perform their duties or give up control to a new trustee. It is a good idea for the heir to talk to an attorney if they suspect the fiduciary duty has been breached, as the attorney can advise them on the next steps to take.
Types of Breaches
The person creating the trust should take care to find the right trustee, but people can change and things can happen, so the trustee might not handle the trust as expected. There are numerous ways a trustee can breach their fiduciary duties, including but not limited to the following.
- Duty to Administer the Trust According to the Terms – The trustee must follow all terms included in the trust for how to handle it and make sure the trust is taken care of properly. Failing to follow the terms of the trust can be considered a breach.
- Duty To Separate and Identify Trust Property – The trustee must keep the assets held in the trust separate from their personal assets and identify any assets in the trust as such.
- Duty to Invest and Manage the Trust – The trustee is in charge of investing the trust as well as managing the assets and must do so correctly. If it is not invested or the investments are not diversified, it could be considered a breach.
- Duty to Protect and Preserve the Trust – The trustee must take action to protect the trust and preserve the assets. Failing to do so can be considered a breach, even if they believe any issues were out of their control.
- Duty to Avoid a Conflict of Interest – The trustee must not have a conflict of interest with administering the trust. If they do, they must disclose it and may have to find a new trustee to handle the trust.
- Duty to Review Trust Assets – The trustee must review the assets regularly to ensure there are no issues and to make sure any investments are doing well. This helps to preserve the trust and minimize the potential for any problems.
- Duty to Distribute Trust Appropriately – The trustee is in charge of distributing the trust properly according to its terms. This includes who should receive the assets in the trust as well as when it can be distributed. Distributing it early or giving assets to someone not covered by the trust can be a breach.
How to Handle a Breach
When a breach is detected or suspected, it is important for the heir to talk to an attorney as soon as possible. For the consultation, they’ll want to bring any documents they have pertaining to the trust, as well as any evidence of a breach. It is okay if the person doesn’t have everything they need, as the attorney can review the documents that are available and let the person know what their options are. If a lawsuit is needed to correct the issue, the attorney will provide assistance getting other supporting documents.
Gathering Evidence of the Breach
Evidence is needed to show in court that a breach has occurred and that a remedy is needed. It is important for the heir to make sure they have as much evidence as possible, though the attorney can help with gathering evidence if necessary. Once the heir has gathered as much evidence as possible, they will want to provide their attorney with a copy. All original copies should be organized and stored properly to prevent anything from happening. It is recommended to have at least two copies of all information, whether they’re physical or digital copies, to prevent anything from being lost or destroyed. The attorney will also keep a copy to use when filing a lawsuit.
Taking the Claim to Court
If there is enough evidence of a breach, the next step is likely to file a lawsuit and take the claim to court. The remedy requested can vary based on the type of breach, but the heir may ask for the trust to be restored, for financial compensation for any missing funds, or for the trustee to step down and allow someone else to manage the trust. The heir’s attorney will help them file the claim with the courts as well as go through the steps needed to prove the breach and request remedies through the courts. If it is not settled out of court, a judge will make the final determination for what will happen.
If you’re the heir named in a trust and you do not believe it’s being handled appropriately by the trustee, you do have options available. Schedule a consultation with an attorney to learn more about your situation and any remedies that may be available to you. It’s best to do this right away, as there may be time limits for filing a claim.
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