The Fiduciary’s Duty of Loyalty: How Trustees Get Sued in Sacramento

Trustees are expected to act in good faith, in the best interests of the beneficiaries, and with unwavering integrity. That standard isn’t just a moral ideal—it’s a legal obligation. In Sacramento, as in all of California, trustees have a fiduciary duty of loyalty. When that duty is broken, lawsuits follow.

At Hackard Law, we represent clients across Northern California—including Sacramento—who are navigating serious trust disputes. Often, these cases begin with a single breach: a trustee who puts their own interests above the beneficiaries they’re supposed to serve. Whether it’s financial self-dealing, hidden transactions, or favoritism among heirs, breaches of the duty of loyalty can lead to major financial losses—and significant legal consequences.

This blog explains what the fiduciary duty of loyalty entails under California law, how it’s commonly violated by trustees in Sacramento cases, and how beneficiaries can fight back when their trust is violated.

I. What Is the Fiduciary Duty of Loyalty?

The fiduciary duty of loyalty is one of the most fundamental responsibilities of a trustee. It means the trustee must always act in the best interest of the trust’s beneficiaries—not themselves or anyone else.

A. The Legal Foundation

Under California Probate Code §16002, a trustee shall administer the trust “solely in the interest of the beneficiaries.” That’s not a suggestion—it’s a mandate. This duty prohibits:

Self-dealing
Conflicts of interest
Preferential treatment of one beneficiary over another
Using trust property for personal gain

Violations of this duty don’t have to be malicious to be actionable. Even a trustee who means well but puts themselves ahead of the trust can be held accountable.

II. Common Violations in Sacramento Trust Cases

Sacramento County courts are no strangers to fiduciary litigation. Here are some of the most common ways trustees breach the duty of loyalty—and find themselves facing lawsuits.

A. Self-Dealing Transactions

Perhaps the most blatant breach of loyalty occurs when trustees benefit personally from trust assets. Examples include:

Selling trust property to themselves or a relative at below market value
Using trust funds to finance personal expenses
Taking “loans” from the trust without permission

Even if the trustee claims these were temporary or reimbursed, courts take such actions seriously.

B. Favoritism Among Beneficiaries

A trustee must treat all beneficiaries impartially unless the trust specifically allows otherwise. We’ve seen Sacramento trustees:

Make early or inflated distributions to one sibling while delaying others
Give rent-free access to trust property to a favored child
Communicate only with certain beneficiaries while ignoring others

These actions create friction—and lawsuits.

C. Concealing Information

Transparency is part of loyalty. Trustees who hide documents, ignore requests for accountings, or provide misleading information are not fulfilling their fiduciary duty.

Failure to provide annual accountings
Refusal to answer questions about expenses
Withholding the trust document itself

These red flags often lead beneficiaries to seek legal counsel.

D. Business Dealings with the Trust

If the trustee owns a business that contracts with the trust—without disclosure and court approval—it’s a textbook conflict of interest. For example:

Hiring their own company to manage trust real estate
Paying their spouse or child from trust funds for “consulting”

In Sacramento probate courts, such actions are heavily scrutinized and often sanctioned.

III. How These Cases Unfold in Sacramento

Once a trustee’s breach is suspected, the legal process begins. In Sacramento, most trust disputes are heard in the Probate Division of the Sacramento County Superior Court.

A. Filing the Petition

The first step is filing a petition under California Probate Code §17200. This petition can seek:

An accounting
Suspension or removal of the trustee
Surcharge (repayment for losses caused)
Damages for breach of fiduciary duty

At Hackard Law, we often start by documenting the suspected breach thoroughly and preparing a petition that demonstrates both wrongdoing and harm to the beneficiaries.

B. Discovery and Depositions

Once the case is filed, both sides gather evidence. This includes:

Bank records
Communication logs
Property appraisals
Trustee compensation reports

We may also depose the trustee—placing them under oath to explain their actions.

C. Court Hearings and Settlement

Many Sacramento cases resolve through negotiated settlement after initial evidence is exchanged. However, serious breaches may proceed to hearings or even trial, where the judge can remove the trustee and award damages.

IV. Real Case Insights: Lessons from Sacramento Courtrooms

While we protect client confidentiality, we’ve seen patterns emerge in Sacramento litigation. Here are a few anonymized examples:

Case #1: The Trustee Who Played Landlord

A Sacramento trustee was renting out a trust-owned duplex—but only reported partial rental income to the beneficiaries. An investigation revealed he was keeping one unit’s cash rent for himself. The court removed him and ordered restitution with interest.

Case #2: The “Family Discount” Sale

An elderly trust beneficiary discovered her nephew—also the trustee—had sold a Napa parcel to his girlfriend for $150,000 under market value. The court voided the sale, citing a clear conflict of interest and breach of loyalty.

Case #3: Silent Treatment and Stonewalling

A trustee refused to answer requests for financial statements for over two years. Once forced to provide an accounting, discrepancies in investment losses raised alarms. He was removed and replaced by a professional fiduciary.

V. How Beneficiaries Can Protect Themselves

The good news: beneficiaries don’t have to accept secrecy, favoritism, or financial abuse. California law empowers them to challenge trustee misconduct.

A. Know Your Rights

You’re entitled to:

A copy of the trust document
Annual accountings (unless waived)
Timely and truthful answers to financial questions
Equal treatment among co-beneficiaries

B. Document Everything

Save emails, texts, and voicemails
Keep notes on suspicious behavior
Request documents in writing

A strong paper trail is invaluable in court.

C. Consult a Trust Litigation Attorney

If you suspect a breach, don’t wait. A Sacramento-based attorney familiar with local court procedures can help you:

File the right petitions
Conduct forensic financial reviews
Protect your inheritance rights

At Hackard Law, our attorneys bring decades of courtroom experience and local knowledge to each case.

VI. Potential Remedies for Breach of Loyalty

When a breach is proven, Sacramento courts have broad power to hold the trustee accountable:

A. Removal of the Trustee

The court can suspend or permanently remove the trustee and appoint a successor—often a neutral third party.

B. Surcharge Orders

The trustee may be personally liable to repay the trust for any losses caused by mismanagement or misconduct.

C. Void or Reverse Transactions

Deals made in bad faith—such as below-market sales to insiders—can be voided.

D. Legal Costs

In some cases, the trustee may be ordered to pay the beneficiaries’ attorneys’ fees, especially if the breach was egregious or involved deceit.

Final Words

The fiduciary duty of loyalty is the bedrock of trust administration. When trustees break that duty—through self-dealing, secrecy, or favoritism—they betray the very people they were appointed to protect. And in Sacramento, as throughout California, courts take these breaches seriously.

Beneficiaries don’t have to suffer in silence. Whether you’re just noticing red flags or already knee-deep in a conflict, Hackard Law is here to help. We know how Sacramento courts work. We know how trustees are held accountable. And we know how to fight for what’s right.

If you’re facing a trustee who’s acting in their own interest instead of yours, let’s talk. Because loyalty shouldn’t just be a word—it should be a promise.