Navigating Trustee Breach Claims: Legal Insights for Beneficiaries

Beneficiaries rely on the trustee of a will to act in their best interests and carefully manage the trust. Trustees, in turn, have a fiduciary duty to act in beneficiaries’ best interests. However, trustees sometimes breach their duties through negligence or adverse intentions. For instance, a trustee of a will may fail to make appropriate and timely distributions to beneficiaries. Situations like these bring harm to the trust’s assets and its heirs.

As a result, beneficiaries must be prepared to navigate trustee breach claims and protect their rights. To do so, beneficiaries should understand the various types of trustee breach claims that may occur; the defenses trustees may raise, and the legal remedies available to resolve these disputes. Along the way, it is recommended that beneficiaries consult counsel to help them secure an outcome in their best interest. Additionally, it is important to have an understanding of how to navigate trust litigation.

Trustee Obligations

Beneficiaries must be aware of trustee obligations to recognize when these responsibilities are not being fulfilled. These obligations are fundamentally based on the trustee’s fiduciary duty to the trust and its beneficiaries and can be listed as follows:

Prioritize and act in the beneficiary’s best interests
Avoid conflicts of interest
Preserve the value of trust assets
Manage and administer trust assets responsibly
Act according to trust terms
Keep accurate records
Provide proper valuation and regular accounting of assets
Avoid mixing trust assets with personal property
Keep beneficiaries informed about the trust’s administration

Additionally, a trustee of a will must act impartially to balance competing interests while upholding the terms set forth for the trust. When claims against the trust arise, trustee obligations include being prepared to defend against them. Likewise, trustees must enforce claims that are crucial to the trust, and that will benefit the beneficiaries. Consulting a litigation attorney can help clarify the legal options available and provide strategic guidance tailored to the specifics of your case.

Examples of Trustee Breach Claims

Several trustee breach claims can be presented depending on the Trustee’s actions or inactions. For example, when a trustee does not adhere to the trust’s terms, they are in breach of the trust. This may include mismanaging trust assets or failing to disclose essential information to beneficiaries.

Additionally, when a trustee uses trust assets for personal use against the trust’s terms, they can be liable for misappropriation of trust funds. Similarly, if a trustee acts for their own benefit at the trust’s or its beneficiaries’ expense, they can be liable for self-dealing. Trustees can also be found guilty of negligence when they fail to protect the trust’s assets from loss or if they are found to have undervalued assets in an effort to minimize distribution to beneficiaries.

Moreover, trustees who fail to keep accurate records or update beneficiaries concerning trust administration are breaching their duties. Irresponsibly investing trust assets or engaging in transactions against the trust terms is also a cause for initiating a trustee breach claim in court.

Essentially, a trustee of a will is in breach of the trust whenever they fail to perform their fiduciary duties as laid out in the section above. For this reason, beneficiaries are advised to seek legal aid to determine their rights and options when a trustee breaches their duty.

Legal Remedies for Trustee Breach Claims

Beneficiaries can employ various legal remedies when a trustee breaches their duties. Moreover, it is crucial that beneficiaries act promptly and prudently when dealing with trustee breaches. This is to protect the trust’s assets and values and prevent further breaches.

One legal solution is for beneficiaries to move the court to issue an injunction, requiring the trustee to cease the ongoing breach. Obtaining an injunction can prevent further damages due to the trustee’s violation(s), safeguard trust assets, and provide immediate relief.

Another remedy is for the beneficiaries to request compensation for the damages suffered as a result of the trustee’s actions. Obtaining a surcharge awards beneficiaries monetary damages for the losses caused by the breach.

Rescission is another option. Trustees who engage in transactions contrary to the trust terms or the best interests of beneficiaries can petition the court to rescind or reverse the transaction. Rescissions can void unlawful transactions, restore trust assets to their condition prior to the breach, and prevent further harm.

Finally, removing or replacing the trustee can also provide relief. Trustees who continually prove unreliable and untrustworthy or commit severe breaches can be replaced or removed from their positions. This safeguards trust assets, protects beneficiaries’ interests, and appoints another trustee to manage the trust accordingly.

It is essential to note that beneficiaries have the right to pursue one or more of these claims, in addition to others not mentioned here, depending on the severity and nature of each issue. However, it would be best for beneficiaries to consult a litigation attorney to determine a remedy most suitable for their unique situation.

Common Defenses Used by Trustees

Just as beneficiaries reserve the right to oversee trustees and act when they fail to fulfill their fiduciary duties, trustees can also present evidence in their defense. These may include arguing that the beneficiary has no standing to bring the claim, that the breach was not significant enough to warrant legal action, or that the trustee acted in good faith at the time of the breach. As such, beneficiaries should understand the legal standards for each defense the trustee may raise and how to counter them.

Adhering to trust terms: A trustee may argue that the actions taken were directly aligned with the trust’s terms and the decedent’s intentions.
Beneficiary consent: A trustee may argue that the beneficiary consented to the trustee’s actions. Similarly, if the beneficiaries knew about the trustee’s actions but never objected to them, a trustee can claim ratification, which prevents the beneficiary from pursuing their claim.
Lack of evidence: A trustee may argue that the beneficiary has no evidence to support their claims.
Good faith: A trustee may argue that they acted prudently, in good faith, and with discernment.
Statute of limitations: A trustee may argue that the beneficiary’s right to file their claim against the trustee has expired.

As evidenced above, trustees have viable and effective claims in their defense if beneficiaries challenge their decisions. As such, it is vital that beneficiaries consult a litigation attorney before bringing their claims to the court to ensure they have a viable case with supporting evidence.

Conclusion

Navigating trustee breach claims can be complex and challenging, but it is sometimes necessary to protect the trust’s assets and beneficiary rights. Beneficiaries must make informed decisions and take appropriate action to hold trustees accountable for their breaches. It is advisable to seek legal counsel to protect your rights and the trust’s terms.