Trustees found guilty of self-dealing or conflicts of interest can be held personally liable for resulting damages and may face removal from their position.
Under the duty of loyalty, a Trustee must administer a Trust “solely in the interest of the beneficiaries.” (See Probate Code section 16002.)
A trustee is appointed by the grantor in the trust document and is legally bound to manage the trust in accordance with the terms of the trust and always act in the best interests of the grantor and beneficiaries.
Trustees are personally liable for all decisions they take in that capacity, and their liability is not automatically limited to the value of the trust fund.
So, yes, you can sue a trustee for negligence. Trustees have a fiduciary duty to manage the trust prudently, act in the beneficiaries' best interests, and adhere to the trust document's terms. Examples of trustee negligence include: Mismanagement of trust assets, such as poor investment decisions.
In general, creditors cannot access assets in certain types of trusts, like irrevocable trusts, because the trustor no longer owns them. However, if the trust remains revocable, creditors may claim the assets.
Generally speaking, once a trust becomes irrevocable, the trustee is entirely in control of the trust assets and the donor has no further rights to the assets and may not be a beneficiary or serve as a trustee.
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
Trustees are not usually subject to court supervision (unlike executors in court supervised probates). Trustees, and Special Trustees and Trust Protectors are the persons entrusted with the proper implementation of a Trust in a managerial or oversight capacity.
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
In essence, while both roles are powerful within their domains, trustees often have more enduring and autonomous control over the assets they manage.
Examples of executor misconduct and trustee misconduct include: Failing to provide accountings to beneficiaries. Favoring one beneficiary over another. Misappropriating or misusing estate or trust assets for personal gain. Commingling personal assets with those of the estate or trust.
In order for the beneficiary to hold the trustee accountable, the beneficiary must have information about what the trustee is required to do and what the trustee actually does. Thus, the trustee has a duty to account and to inform.
An executor does not possess the power to overrule or change the terms established by a trust; these roles carry separate responsibilities. An executor's role consists of overseeing and closing an estate as per its will's instructions without disrupting or interfering with their independent functions as trustee.
Under California law, embezzling trust funds or property valued at $950 or less is a misdemeanor offense and is punishable by up to 6 months in county jail. If a trustee embezzles more than $950 from the trust, they can be charged with felony embezzlement, which carries a sentence of up to 3 years in jail.
In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries. The trustee has a fiduciary duty to act in the best interest of the beneficiaries when managing the property of the trust.
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
Typically, a revocable trust with clear provisions for outright distribution might conclude within 12 to 18 months. However, in simpler cases, the process can take an average of 4 to 5 months without complications.
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
WHO IS THE “RIGHT” TRUSTEE? A natural first inclination is to consider a family member or trusted friend who knows you and your philosophies and values well. Family or friends may personally know your beneficiaries and their needs.
The downside of irrevocable trust is that you can't change it. And you can't act as your own trustee either. Once the trust is set up and the assets are transferred, you no longer have control over them, which can be a huge danger if you aren't confident about the reason you're setting up the trust to begin with.
Serving as the trustee of a trust instills a person with significant power. They have access to all the trust assets, but with a catch: They can only use those assets to carry out the instructions of the trust.
So, what assets aren't exempt in California bankruptcy cases? Valuable art and collectibles, luxury vehicles, investment accounts that aren't linked to retirement, cash, second homes, high equity homes, and expensive jewelry or valuables are all non-exempt assets that a trustee can legally sell to repay creditors.
Can a lien be placed on a trust? A lien filed against the beneficiary of the trust (you) cannot be attached to the property. After all, the title is not held in your name. HOWEVER, the property itself can be liened.