Can You Sue a Trustee for Negligence?
Creating a trust is an incredible way to plan your estate. However, as with all estate planning methods, this one has unique challenges, like unwillingly appointing a negligent trustee. For this reason, choosing someone you know well for this role is essential.
So, is the trustee investing incorrectly, administering the assets inefficiently, or taking funds from the trust? What are you supposed to do in this situation? Can you sue a trustee for negligence? Often, the damages and losses incurred by such a trustee can be less noticeable. However, you have multiple legal rights to sue the trustee as a beneficiary. In this write-up, we discuss suing a trustee for various reasons and the grounds that will enable you to sue them.
So, Can You Sue a Trustee for Negligence?
Yes. You can sue a trustee for many reasons, including negligence, and even win! Since the trustee is legally held to high standards and is expected to be accountable and act responsibly, it’s possible to win if you have evidence.
Moreover, trustees often forget to keep clean records or neglect their administrative duties, which is grounds for suing them. Generally, courts put their trust in trustees, as the name suggests. Therefore, they frown upon those who fail to do their duty correctly or blatantly abuse their power.
Trustees are typically seen as fiduciaries and are held to high legal standards. As the trustee is granted the responsibilities and duties of fiduciaries, there are several grounds to sue the trustee of a trust. At the top of the list is negligent behavior that violates their fiduciary responsibility.
Who is a Trustee?
This is an individual appointed by the grantor through the trust deed to manage the trust’s assets, funds, and property. A trustee is expected to act in the trust’s best interests.
A trust differs from a will because it is effective when established, while a will takes effect after the testator’s demise. The creator of a trust is called a grantor, donor, trust maker, or settlor. Often, the grantor can appoint themselves as the trustee and name a successor trustee upon their death.
Legal Grounds for Suing a Trustee
Several legal reasons allow you to sue a trustee, and they are as follows:
Negligence
As pointed out, you can sue a trustee because of negligence. But what does negligence mean? For starters, it can constitute a violation of fiduciary duty since trustee misconduct can comprise unintentional and intentional conduct that leads to loss of trust property and assets. Also, negligence contains trustee malfeasance, which is sufficient grounds for filing a suit against and removing them from their position. However, to be specific, trustee negligence is a violation of fiduciary duty due to not paying attention or caring or lacking the ability to do what is required of you. It might not necessarily be intentional.
Even though acts like embezzlement and fraud constitute malicious, self-serving conduct from the trustee, negligence typically happens because the trustee was inattentive or careless about their role.
All the same, an inadvertent violation of fiduciary duty is still grounds for suing the trustee. For this reason, beneficiaries can file a suit against such a trustee for any damages due to the trustee’s negligence.
Breach of Fiduciary Duty
Something else that creates enough grounds to sue a trustee is a violation of their fiduciary duty. Suing trustee for breach of fiduciary duty involves proving that they have violated their responsibilities to the trust. Legally, a trustee must act only in the beneficiaries’ best interests.
Some of their responsibilities include:
- Putting the beneficiaries’ interests over theirs.
- Acting right towards the beneficiaries.
- Administering the assets of the trust correctly.
- Treating all the beneficiaries equally with respect.
- Being truthful about pertinent details.
With that in mind, a breach of fiduciary duty happens if the trustee fails to fulfill one or more of these legal responsibilities they’re given.
Other Legitimate Grounds to Sue a Trustee
Negligence and violation of fiduciary duty are the most common reasons for beneficiaries to sue trustees. However, more grounds allow you to sue a trustee, such as the following:
Misappropriation of Trust Finances
Misappropriation of trust finances is when the trustee starts paying for stuff that doesn’t directly profit the trust. For instance, if they have been utilizing trust funds to buy themselves cars, jewelry, or such items, this would be considered a misappropriation of trust finances.
Trust Funds Mismanagement
Mismanagement of trust funds is when the trustee doesn’t make the property and assets of the trust productive or leaves them to become economic waste. So, if they do not do something to boost the poorly performing investments of the trust, they can be sued for mismanagement of trust finances.
Malfeasance
Malfeasance happens when a trustee acts “in bad faith” or intentionally commits an act that harms the beneficiaries. For example, a trustee can donate property or assets from the trust to a political organization in the name of a beneficiary.
Fraud
Fraud is when a trustee alters a material fact to deprive or mislead. An instance of fraud is when a trustee lies to a beneficiary and tells them there is no trust.
What You Should Consider Before Suing the Trustee
Want to proceed and sue the trustee? Here is what to consider before suing a negligent trustee:
Evidence
Do you have enough proof? If a beneficiary wants to sue a trustee for negligence, they need to prove that this person has been negligent and doesn’t reasonably take care of the trust. Specifically, the beneficiary must prove that the trustee hasn’t acted in the trust’s interest, acted with care when managing the trust investments or assets, or acted in good faith regarding the trust.
The No-Contest Clause
The No-contest clause is included in the trust deed to dissuade trivial attempts to undo estate plans. If a beneficiary sues the trustee with the trust containing such a clause, they could be disinherited.
Hire a lawyer to review the deed before suing the trustee. This will also be beneficial as they will explain the legal implications of your inheritance.
What Takes Place When a Trustee Breaches the Trust?
The California Probate Code 15642 allows a trustee who has violated the trust’s terms to be removed from this position as permitted by the probate court or trust deed. The grounds for removal are the ones pointed out above. So, when they breach any of these duties, they are considered to have violated the terms of the trust, which can lead to their removal. If a co-trustee or beneficiary files a petition to remove a trustee, the probate court arranges a hearing to listen to both sides’ arguments.
The court can dictate whether a trustee should be removed permanently or suspended and appoint a new person or approve the successor trustee. Additionally, the court can find the trustee innocent and allow them to continue managing the trustee. Finally, if the court considers the trustee guilty of negligence, they can order them to pay legal fees, court expenses, and damages incurred.
Conclusion
So, can you sue a trustee for negligence? Definitely!
Trustee misconduct happens when the trustee acts incompetently or negligently while undertaking their responsibilities. This could also be called a breach of fiduciary duty since a trustee is a fiduciary given the responsibility of handling the assets in a trust for the beneficiaries’ advantage.
There are numerous rules on how trustees should conduct themselves when doing their job, and the most important is acting with the beneficiaries’ interest in mind and competence. If you are considering suing a trustee, get an experienced lawyer so that they can explain the process and legal implications to you.
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Trustee Topics
- Can a Trustee sue on behalf of the trust
- Can a Trustee be held personally liable
- Can a Trustee remove a Beneficiary from a trust
- Settling a Trust After Death
- Being a Trustee of a Trust
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