It seems like administration of an estate should be relatively simple: the trustee or the administrator simply proceeds as directed by the estate documents and distributes the property of the estate accordingly. Unfortunately, estate administration can get complicated with frustration boiling over into disputes. There are a number of claims that can arise, from arguments over how the trust documents should be interpreted, to whether the documents are legally valid.
One of the most common claims in estate litigation is that the trustee has breached his or her fiduciary duty. If you believe the breach of fiduciary duty has occurred, you should contact one of the experienced Los Angeles estate litigation lawyers at Hackard Law as soon as you can.
Trustee? Fiduciary Duty?
If you're involved in an estate dispute, it is very easy to quickly lose your bearings. In addition to the stress and anxiety, the terminology alone is complicated. Therefore, it may be helpful to define some terms before we go any further.
· A trustee is someone who is appointed to manage property for the benefit of another person. A trustee can be a natural person or a corporate entity. The trustee acts as directed by the trust agreement, which appoints him as trustee, identifies the property of the trust, and describes what the trustee can and can't do.
· A beneficiary is someone (or an entity, such as a charitable organization) that is entitled to receive property from an estate.
· A fiduciary is someone (such as a trustee) who has the duty of acting in good faith with regard to the interests of another (the beneficiary). Note that the fiduciary duty extends beyond mere financial interests, and in an estate case, would be defined as those interests created by the estate documents.
To put it together, a trustee is someone who, by means of his appointment in the trust agreement, has a fiduciary duty to act in the beneficiary's best interest.
Breaching a Fiduciary Duty
When someone alleges that the trustee breached his or her fiduciary duty, they are claiming that the individual acted in a way that was not in their best interest with respect to the trust assets. Let's discuss some of the ways that trustees commonly breach their fiduciary duties.
· Using estate assets for the trustee's own benefit. This may not require much explanation, as it's pretty clear what it means. However, making a claim that the trustee has used estate assets for his own benefit is much more complicated than you might think. It's important to understand that the trust agreement may authorize the trustee to use the property of the estate within certain parameters. For example, the trustee may be entitled to use money in the estate to pay the expenses of administering the estate, such as taxes, commissions, or other transactional charges. Alternatively, the trustee might be authorized to use the property on a temporary basis, for his own personal use. Finally, the trustee may also be a beneficiary, which can create the appearance that he has breached his fiduciary duty. Whichever the case, we recommend that you consult with an experienced estate litigation attorney to help determine whether the trustee may have breached his fiduciary duty in your case.
· Inappropriate gifts. Many claims for breach of the fiduciary duty arise from gifts. The trustee would obviously be in breach of his fiduciary duty if he made a gift from the estate to someone who was not a beneficiary of the estate. However, gifts can also be problematic when they are made to the wrong beneficiary or before the beneficiary is entitled to receive the gift.
· Mismanagement or waste. Another common claim is that the trustee breached her fiduciary duty by mismanaging the estate, leading to the accumulation of debt or other losses. This may be because the trustee failed to pay taxes or did not pay other expenses. The trustee may have also failed to manage the estate's investments, failing to realize gains or minimize losses. This can be a fairly complicated claim to make, but an experienced estate litigation attorney can help you sort this out.
· Commingling. This breach occurs when the trustee commingles the funds or other property of the estate with her own funds or those of other people. This claim often overlaps with a claim that the trustee mismanaged the estate. The trustee may not have necessarily intended to do anything wrong, or it may be due to her intentional and inappropriate use of estate assets for her own benefit. Commingling estate funds can be very difficult to untangle, especially if there are gains or losses that accrued as a result of the commingling.
Proving the Breach
Obviously, it's not enough to simply make the claim that the trustee has breached her fiduciary duty to you. You have to prove it. In order to prevail on your claim, you have to meet the following elements:
● That the trustee owed you a fiduciary duty;
● That there was a breach of that duty; and
● That the breach caused you financial harm that the court can address.
In other words, you need to prove that the trustee owed you a fiduciary duty that she breached, which caused you financial harm that the court can fix. If you believe that your trustee has breached his or her fiduciary duty, pay particular attention to the last element - if the trustee has breached his duty but hasn't caused any financial harm, you will not be able to prevail on your claim.
Hackard Law-Los Angeles Estate Litigation Attorneys
No one likes estate litigation, but sometimes it is simply unavoidable. The attorneys at Hackard Law specialize in estate litigation, with a particular focus on cases where it is alleged the trustee breached his or her fiduciary duty. We help beneficiaries and trustees in estate cases where someone believes the trustee is in breach of his or her fiduciary duty. If you believe a breach has occurred in your case, or you just have questions and can't find answers, we're here to help. Contact us today via email or call (916) 313-3030 from Santa Clara or (213) 357-5200 from Los Angeles to schedule your free consultation. We serve clients throughout California.