Is Your Trust Being Mismanaged?

When you are an California fiduciary duty lawyer, you sometimes interact with clients that have suspicions about the actions of a financial manager of some kind. Before we get into the details, we should provide some basic background information. A fiduciary is a person or entity that has the legal responsibility to competently and honestly manage financial assets for someone.

The best way to explain this is through a simple example. One of the most commonly utilized tools in the field of estate planning is the revocable living trust. Many people think that you have to be very wealthy to utilize a trust instead of a will, but in fact, this is not the case. A revocable living trust can be a good choice for reasonably successful people that are not multimillionaires.

A living trust has three major players. The person that establishes the trust is called the grantor or settlor. In the trust declaration, the grantor will name beneficiaries that receive asset transfers after the grantor’s death. There is also a trustee that will administer the trust after the person that establishes the trust has passed away.

This trustee has fiduciary duties, because the trustee will be managing assets in the trust. The trustee has a responsibility to the person that passed away, and they also have a responsibility to the beneficiaries.

Many people that establish a living trust assume that they should name someone that they know to act as the trustee. This can make sense on the surface, but there are some definite drawbacks that should be taken into consideration. It takes a significant amount of financial acumen to effectively administer a trust, and the stakes are rather high.

Plus, it can be a time-consuming assignment, and highly competent people usually don’t have a lot of spare time. There is also the matter of longevity. If you were to establish a living trust and name your brother, who is close to your age, to act as the trustee, he may pass away shortly after you do. Yes, you can add successors, but things can get complicated when trustees come and go.

When someone that knows the beneficiaries personally serves as the trustee, there can be real or perceived conflicts of interest. If they are real, this could be a breach of fiduciary duty, and a beneficiary could initiate a legal action if the trustee is showing unfair favoritism toward another beneficiary.

A trustee that is not necessarily nefarious may simply make independent decisions that are not in the spirit of the trust declaration. He or she may think that one person needs the money more than another, but that’s not the way things work when it comes to legally binding documents like living trusts.

There is also the matter of a trustee taking assets that are in the trust. An individual could reason that they deserve extra compensation for their efforts, and make a decision autonomously. This is definitely a clear and blatant breach of fiduciary duty.

The trust department of banks and trust companies are professional fiduciaries. If you are using a trust when you are planning your estate, you could consider using a professional instead of someone that you know personally. There would be no favoritism or conflicts of interest, and the assets would be managed by professionals that know how to maximize the potential of monetary resources. And of course, there would be no longevity concerns if you engage a corporate entity.

These people take their work very seriously, and there is organizational oversight. Their careers depend on their honesty, integrity, and competence. This being stated, things happen within any industry, and there have certainly been instances of fiduciary duty breaches committed by licensed professionals.

Contact a California Fiduciary Duty Lawyer Today!

This is one example of a scenario that can result in a breach of fiduciary duty, but there are others. If you think that a trustee or some other fiduciary is guilty of a breach, we would be more than glad to assist you. We can sit down, get to know you, and gain understanding of the situation. Ultimately, we will explain your options to you so that you can make a fully informed decision.

Our Irvine fiduciary duty lawyer will vigorously advocate your interests if you decide to go forward and file a lawsuit. You can send us a message through this website to request a consultation appointment, and we can be reached by phone at 714-406-4595.