Trustee Defense Lawyer for Allegations of Negligence

What is Trustee Negligence?

Also known as breach of fiduciary duties, trustee negligence comes from the act of being negligent. It is when the trustee of a trust intentionally or unintentionally fails to perform their fiduciary duties. In most cases, the action results in the loss of the grantor’s assets or property.

Beneficiaries of the trust can sue the trustee in court for negligence to remove or surcharge them. Note that this case is not the same as embezzlement with self-serving and malicious behavior or fraud. It is considered that the trustee was careless and did not perform their fiduciary duties.

Types of Trustee Negligence

Trustee negligence in a trust can be divided into three categories, as shown below:

Gross Negligence

This type of negligence involves using funds to cause a beneficiary to get hurt or suffer. For instance, failure to pay taxes on a home or a property, especially if the beneficiary is an individual with special needs, can be categorized as gross negligence. If the trustee fails to pay the taxes for several years, the beneficiary might end up homeless.

Negligence

Negligence is the incompetence or ignorance of a trustee in trust management. The trustee openly fails to conduct their fiduciary duties, causing the beneficiaries of the trust to suffer. For instance, if the trustee manages an estate and fails to pay the electricity bill on time, it can cause the beneficiaries to go without power for a couple of days, days, or years.

Negligence Misrepresentation

As the name suggests, this type of negligence is when an individual trusted by the grantor to act as the trustee fails to exercise care to get authentic information. Note that there is quite a similarity between fraud and misrepresentation. If the trustee says something incorrect in the latter, the case will be regarded as fraud.

What Happens When a Trustee Violates the Terms of Trust?

According to the California Probate Code 15262, a trustee can be removed or discontinued by the court if found guilty of trust negligence. Examples of trustee violations that can lead to removal include;
Failure to act in the interest of the beneficiaries
Failure to distribute trust as stated in the document
Misuse and waste of property or assets
Failure to protect and enforce claims against the trust
Failure to distribute funds equally
Use of trust assets for personal gain
Failure to inform beneficiaries of new updates with the trust

If a trustee of a trust is found to have committed any of the above offenses, they are said to have breached the trust, which can lead to their removal. The co-trustee or beneficiary can file a case in court, and the probate court will schedule a hearing. The court can also appoint a replacement or successor trustee or order the current trustee to continue with work if they are found not to be guilty.

What Happens When the Acting Trustee Resigns or Dies?

Sometimes, the trustee does not necessarily have to be ousted. They can willingly resign or meet a sudden death. In such cases, the court must appoint a new trustee or heir successor to perform the fiduciary duties. Some trusts have two or more co-trustees, making it easier for the court to appoint the acting trustee.

In cases where the vacancy cannot be filled, the company or lawyers entrusted with trust duties will have to take over, but only if all the adult beneficiaries agree. Alternatively, the beneficiaries can file a petition to appoint or vote for a new trustee. Any beneficiary above the legal age can vote or nominate their candidate of choice.

How Can a Trustee Know if an Asset is in the Trust or Not?

Depending on your state, knowing if a particular property is in the trust is easy. All you need to do is to contact the County Assessor’s Office or visit the County Clerk-Recorder’s Office. Even so, you should note that tracing the ownership of brokerage accounts, bank accounts, and personal property can prove treacherous. This is because only the owner has the right to access bank statements.

What are the Roles of a Trustee Defense Lawyer in a Negligence Case?

One of the best things about hiring a professional liability defense lawyer is that they will work to defend you in court. There are numerous cases almost every day in court where beneficiaries accuse trustees of misappropriating funds and other claims without any basis whatsoever. Here are some roles an experienced trustee lawyer can assume to help you win the case.

Defend the trustee in claims of selling real estate or transferring businesses in the trust.

Technically, the trustee has complete control of property and assets in the trust. This means they can do so if they wish to sell, but only if all the beneficiaries in the trust agree. If they sell or transfer business ownership without their consent, it is considered an offense, and the trustee can risk going to jail. If a suit is filed against the trustee, your liability defense attorney has to argue their case in court.

Defend trustee against misappropriation of funds and demand for an accounting.

This is the most common claim brought forward to court by the beneficiaries of a trust. Trustees are accused of misappropriating funds, such as spending excessive trust funds on unnecessary items, selling property too low, and many more wrongdoings. In such cases, as a trustee, you will need an experienced lawyer by their side to help them win the case.

If the trustee is accused of stealing, the lawyer will help them with accounting documentation. They might also need to work with an experienced accountant to ensure all supporting documents and income expenses are presented.

Defend the trust against claims from creditors.

Creditors tend to show up after a person dies with all kinds of claims to get a more significant share of the deceased’s assets. Trustees should anticipate claims or lawsuits from individuals such as ex-spouses, business partners, the IRS, Medicaid, and the list goes on. The best way for trustees to enjoy the desired results is to hire an experienced attorney.

The lawyer will help identify legitimate liabilities and debts that need to be paid first or are urgent. Besides, it is possible to be held accountable if funds are disbursed by confirming the legitimacy of claims from creditors.

Defend the trustee’s continued service and advocacy.

In most cases, especially when an individual has been a trustee for a long, beneficiaries will have “personal” issues with the representative. This can lead to petitions in court to have the trustee removed or replaced. However, this is against the law because the grantor personally selected the trust representative.

With a qualified trustee defense lawyer, it is possible to defend the trustee’s continued service and advocacy. Unless they breached their fiduciary duties, the active trust representative will continue their work according to the instructions of the trust documents.

Fiduciary Accounting

Finances are everything when it comes to trust distribution. Record-keeping is critical in fiduciary accounting if the trustee is an experienced accountant. You must account for all the assets and funds in the trust to ensure the right portion is provided to the beneficiaries.

Besides, in case there is a petition in court, you will need to work with a trustee defense lawyer for negligence to account for the expenses. If done correctly, you don’t have to worry about fiduciary accounting. You should be fine unless there are instances of fraud or misappropriation of funds.
The best way to ensure you are safe is to conduct meetings and have the beneficiaries sign the monthly or yearly accounting documents.

Final Thoughts

Beneficiaries and trustees litigation can prove to be an inevitable process. But that does not mean that trustees are always wrong. Some claims of wrongdoing are not based on factual records, which makes it necessary for trustees to ensure they are prepared with a defense lawyer for negligence. They will ensure your rights are protected and defend you from harassment from beneficiaries of the trust.

Are you looking for help with legal matters? We’ve got you covered. Contact us to get in touch with one of our experienced lawyers, and there is no doubt that you will enjoy exceptional results.