2 implications of a trustee’s fiduciary duty to beneficiaries

When someone takes the time to create a trust, they will likely put in place numerous rules about the use of the assets used to fund the trust. The trustee that they empower to manage and distribute those assets will have a powerful obligation to the beneficiaries listed in the trust documents. 

A trustee has a profound legal obligation to the beneficiaries of an estate. They should put the best interests of those beneficiaries above their own wishes. Unfortunately, not everyone is capable of holding themselves to such a high standard of behavior.

What happens when beneficiaries allege a breach of fiduciary duty? 

They can potentially remove the trustee

Although the person who created the trust may have carefully chosen the trustee based on their personal experience with that individual, people can change in ways that others don’t anticipate. A previously trustworthy and honest person could end up corrupted by their sense of power and access to trust resources. People can also fail in their fiduciary duty due to procrastination or incompetence. 

When a trustee has taken actions for their personal enrichment or that reduce the value of the assets held in the trust, the beneficiaries of the trust can potentially challenge them in probate court. A judge could remove a trustee from their position and could potentially even hold them financially responsible for any misconduct that occurred. Those tasked with trust administration need to ensure they understand their obligations and fulfill them appropriately. 

Understanding the challenges that could lead to someone’s removal during trust administration can help those serving as trustees or expecting to benefit from a trust.