Abuse of Trust: Breach of Fiduciary Duty by the Trustee
UPDATED: December 18, 2019
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The abuse of trust or a breach of fiduciary duty by a trustee can be devastating. When an individual plans the distribution of his or her estate among beneficiaries, either by writing a will or creating a living trust, he or she will typically put responsibility for the matter into the hands of a trustee. A trustee may be a person or an organization that is qualified to handle the distribution of the estate according to the written wishes of the individual upon his or her death. A trustee can, in fact, be anyone specified by the deceased, from a lawyer to a financial investment company to a family member or friend. Known as a fiduciary, the trustee is someone who is legally bound to represent the individual in making decisions regarding the estate, and to oversee matters in that individual’s place. This is a legal obligation for anyone appointed trustee of an estate.
When You Can’t Trust the Trustee
If the trustee doesn’t perform his or her duties as stated, i.e. if he or she acts in a way that is disloyal or careless and constitutes an abuse of trust regarding the wishes of the estate holder, then he or she can be considered in breach of fiduciary duty. This is legally an abuse of trust, and that person or company can be held responsible.
It can be difficult to determine exactly when an abuse of trust has taken place, simply because the trustee’s position does allow for him or her to make judgment calls to a certain extent; this means not all of the rules are cut and dried. However, if the evidence seems to show that the person didn’t act with reasonable care, skill, or prudence, he or she may be liable.
How to Recognize a Breach of Fiduciary Duty by the Trustee
Typically, an abuse of trust case is brought against a trustee by one of the beneficiaries, since they are the ones who suffer at the hands of his mistakes. There is no official enforcer of the trustee’s job, aside from the beneficiaries to whom he is responsible; however, a beneficiary who feels that his or her rights are not being protected, or who feels that the wishes of the deceased are not being upheld, has every right to file a claim against the trustee. Some common scenarios in which a breach of trust has taken place include:
- The trustee’s own finances are mingled with the estate (this is not uncommon, given that the trustee is sometimes a family member; however, clear records must be kept and the trustee must make every effort to create distinction between his funds and those of the estate; if this is not done, it constitutes a breach.
- Conflicts of interest in which the trustee may have personal reasons to act in a way that goes against the wishes of the deceased and best interests of the beneficiaries. A trustee must not profit from the trust, borrow from the trust, or any number of other transactions that would benefit the trustee personally.
- The trustee fails to stop a co-trustee or other responsible party from acting in a way that constitutes a breach of trust; any co-trustees are jointly responsible for the behavior of all.
Filing a Claim for Breach of Fiduciary Duty by the Trustee
If a beneficiary wants to file a breach of trust against a trustee, he or she must generally do so within one year ofthe incident’s original documentation. If the court agrees that the breach took place, in most cases a third party will step in and ensure that the beneficiary’s claim is handled properly and he or she is given what he is entitled to have according to the will or trust. Depending on the nature of the breach and whether or not it can be clearly proven, the trustee may also be subject to removal from the position and ordered to pay fines and/ or compensation to any beneficiaries injured by his or her actions. In addition, a beneficiary may sue a trustee personally in their capacity as the trustee in probate court.
If you believe that the trustee managing an estate you are involved in has been abusing his position, you should strongly consider speaking with a lawyer as soon as possible. Your attorney can help you to gather evidence and take the proper action against a trustee so he does not do any further damage to the assets of the estate.