Discussing Trustee Liability and How to Avoid It

Trustee Liability in Los Angeles California can be avoided with careful advice and planning in trust management during trust administration. Talk to our trustee attorneys to find out how you can avoid the common mistakes of successor trustees in trust management.

Trustee Errors That Can Cost You and the Trust

Once a trustee exercises authority over the trust, his or her actions in that capacity are to benefit the trust. When a trustee of a trust makes a mistake or error, the ramifications can be great for not only the trustee of the trust but for the beneficiaries and the trust itself. In this article, we explore some of the trustee errors that lead to trust litigation in Los Angeles. Our lawyers can assist you in fiduciary law matters in Los Angeles.

Top eleven trust management mistakes by trustees of trusts can be categorized in many different ways, but some of them are below:

  1. Mixing the assets of the trust with the trustee’s personal assets.
  2. Not keeping separate books and records of the trust transactions.
  3. Overpaying one beneficiary over other beneficiaries.
  4. Favoring one’s own benefits in the trust over the interests of the beneficiaries.
  5. Overpaying trustee’s fees in Los Angeles.
  6. Not having a diverse portfolio of assets under the Prudent Investor Rule.
  7. Not accounting to the beneficiaries.
  8. Borrowing from the trust for your personal gain where the trust language prohibits profiting from the trust or where the trust is silent about it.
  9. Not getting legal advice from an expert family trust lawyer.
  10. Relying on others to manage the trust tasks that cannot be delegated.
  11. Not following the terms of the trust or getting court instruction about items that are uncertain. See this interesting 2020 case called Trolan here regarding what the Court can order. Don’t hold up the distribution of the trust assets if you are a trustee, and seek a Petition for Instructions if you are not going to distribute the assets for a reason and ask the Court if that is acceptable.

Trust management can be tricky. When you are a trustee of a trust or multiple trusts, you must take action and get advice early in trust administration so that you do not make these common trust mistakes. As a trustee or successor trustee, you are the manager of the trust with tremendous responsibilities. These errors are also common to executors and to personal representatives in California.  


How is a trustee’s mistake discovered?

In most cases,mistakes by a trustee are discovered via an accounting, no accounting or a late accounting.  There are some occasions where a trustee’s mistake is discovered through public records.    However, in most cases, we get calls from beneficiaries who tell us they have a feeling the trustee is doing something wrong.  In those cases, we may hire a private investigator to determine whether damage has occurred or is about to occur which leads us to two different methods of handling a mistake vs. a mistake which is likely to occur.


What happens if your trustee made a mistake as a trustee?

There are remedies in the Probate Code for trustee errors.  The Court can issue a judgment against you called a surcharge judgment which can range from reducing your trustee’s fees to outright issuing an order to disgorge profits, money damages against the trustee, and even attorneys fees and costs.

Call attorney Mina Sirkin when you are a trustee or successor trustee looking to find a trust litigation lawyer near you and get solid advice about trust management and administration from our expert with over 27 years of experience in family trusts.