There’s a lot beneficiaries can do to set things right, but it’s not as easy as you may think. Often beneficiaries will say “isn’t the Trustee breaking the law?” The answer is yes, but who is going to stand up and hold the Trustee responsible for breaking his or her duties as a Trustee?
The short answer: you—and only you. This is not a matter where law enforcement will step in and press criminal charges. There is no governmental agency that oversees Trustees and forces them to act as they should. There are laws under the California Probate Code that you can enforce, but you must enforce them. So how do you do that?
First step,
Find a Good Lawyer Who Can File a Lawsuit Against The Trustee For You
Trust lawsuits are filed in Probate Court. And most of the Trustee’s duties are laid out in the California Probate Code. For example, Probate Code section 16000 says that the Trustee must administer the Trust according to the Trust terms. Thus, if the Trust mandates a distribution to the beneficiaries, then that’s what the Trustee must do.
Further, Probate Code sections 16002, 16003, and 16004 outline the duties of loyalty, impartiality, and avoiding conflicts of interests. These three Probate Code sections can be used to assert that your Trustee has breached his duties if he refuses to abide by the Trust terms, and/or steals Trust assets.
Second step,
You Must Consider What Actions You Want To Ask The Court To Take.
For example, the court could remove the Trustee, but that can take time. Or the court can order the Trustee to distribute Trust assets, which may take less time. Probate Code section 16420 sets out the remedies for a Trustee’s breach of Trust. Remedies are the consequences the law imposes on Trustees for violating their duties. Under 16420, the court can take the following actions where a Trustee breaches his or her fiduciary duties:
- Order the Trustee to perform the Trustee’s duties (for example, order the Trustee to make a distribution);
- Order the Trustee to not take an action that would be a breach of Trust;
- Order the Trustee to pay back money or take other actions to reimburse the Trust for any losses;
- Appoint a temporary Trustee or receiver to take possession of Trust property and administer the Trust;
- Remove the Trustee;
- Set aside acts the Trustee has already taken (subject to special rules that may limit this power);
- Trace Trust property that has been wrongfully disposed of and recover the property or its proceeds (subject to certain limitations);
- Reduce or deny compensation to the Trustee; and/or
- Impose an equitable lien or constructive Trust on Trust property.
As you can see, this is a robust list of actions the court can take to right the wrongs of a bad Trustee. Notice, however, that the list does not include things like damages for pain and suffering, or any criminal penalties. The court has wide discretion to fix the problems Trustees have created, but not to punish the Trustee per se.
Having said that, Section 16420(b) and Section 16442 both state that the Probe Code does not preclude the use of any other legal claims available under the law. For example, a Trustee who steals Trust assets could also be sued for fraud or conversion. That means you should talk to your lawyer about any other claims that might arise. Be advised, however, that other types of claims may not be as easy to bring in most cases as the claims allowed under the Probate Code. Also, fraud claims don’t apply to cases where a Trustee has negligently breached his or her duties because fraud requires intent to defraud. In a vast majority of cases, Trustees act badly, but not necessarily intentionally in the sense of a fraud claim. These issues must be analyzed before filing in court.
Third step,
Once You Decide What Remedies You Want to Pursue, Then You Must Get To Work To Build Your Case
The court is not going to give you what you want without you providing support for your position. By support, we mean evidence—and it must be admissible evidence, not hearsay. This is where a competent lawyer can really help drive your case forward by taking the correct actions to help you gather admissible evidence.
It’s not easy to hold a Trustee liable in every case. The burden is on you to take the actions necessary to hold your Trustee accountable. But if you do choose to take those actions you will see that there are a lot of rules under the Probate Code that will support your claims. The Trustee, after all, is the only one who is required to follow the duties and responsibilities of a Trustee.
