While many people’s estate plans can be created with nothing more than a will, more complex plans may require the introduction of a trust. Trusts are legal instruments that involve three separate roles: settlor, trustee, and beneficiary. The settlor is the person who creates the trust, and they do so by providing some set of property to to the trustee. The trustee then manages the trust’s property in accordance with the settlor’s instructions for the benefit of the beneficiary.
As the name suggests, the trustee is a position that requires a great deal of trust and honesty. It is their job to take care of property for some third party, and they have a considerable amount of access to that property. Consequently, the law imposes a variety of duties on trustees to ensure that they are acting appropriately in the care of someone else’s property, and it provides a variety of remedies in the case of bad behavior by the trustee.
A Trustee’s Duties
The law imposes two main fiduciary duties on trustees as a result of their special position of trust. The first duty is the duty of loyalty to the beneficiary. This duty requires the trustee to manage the trust’s funds in the interests of the beneficiary and to refrain from entering into transactions where there is a conflict between the trustee’s role and their own interests. For instance, this duty would forbid the trustee from loaning money from the trust or purchasing trust property for themselves.
The second main duty that a trustee is responsible for is the duty to act as a reasonably prudent person. A trustee must use reasonable care when administering the trust. This duty can manifest in a variety of ways. Most simply, the trustee has a duty to make sure they are paying attention to the trust assets and providing for their upkeep as necessary. Additionally, this duty also requires a trustee to adopt a reasonable investment strategy for the trust’s assets.
There are also a variety of other less central trust duties, such as the duty to remain impartial between multiple beneficiaries.
Holding a Trustee Accountable
In the event that a trustee breaches one of their fiduciary duties, the law provides a variety of different remedies that the beneficiary can seek depending on the situation. One of the most common remedies that people seek is compensation for the economic harm that resulted from the trustee’s breach. For instance, if the trustee purchased trust funds for themselves and gave themselves a discount, they could be required to pay the difference in price. Alternatively, wronged beneficiaries may also be able to seek an invalidation of inappropriate transactions, which in the above case would allow them to recover the property that was improperly purchased from the trust. Beyond those remedies, a beneficiary who discovers breaches by their trustee may also seek to have that trustee removed and replaced with someone else.
Breaches of fiduciary duties are serious breaches of trust, and they often come with significant financial consequences. If you are the beneficiary of a trust and you think your trustee may have breached their duties, contact a Columbus probate litigation attorney today at the Law Office of Mike Gertner to learn more about your legal options.