Breach of Fiduciary Duty in California

Breach of fiduciary duty is a serious violation of trust; it is also against the law.

Division 9, Part 4 of California’s Probate Code assigns specific duties to trustees, also known as fiduciaries. The major responsibilities of a fiduciary include:

• Administering the trust in accordance with the trust instrument, which is usually the written document creating the trust
• Following the written instructions provided by the person/persons initiating the trust
• Administering the trust only in ways that reflect the interest of the beneficiaries
• Treating each of the beneficiaries equally, even when the beneficiaries have different interests
• Taking reasonable steps to maintain control of the trust’s property and preserve that property

The Fiduciary Must Never:

• Use the trust’s property for the fiduciary’s own benefit or financial gain
• Require beneficiaries to waive the fiduciary’s liability
• Knowingly becoming a trustee to any additional trusts that might undermine or interfere with the interests of the beneficiaries of the first trust

Failing to fulfill these duties or engaging in activities that endanger the trust may be a breach of fiduciary duties in the state of California, opening the door for legal action against the trustee.

Breach of Fiduciary Duties

Fiduciary duty starts the moment someone agrees to be a trustee. Once they agree to take on fiduciary responsibility, the law forbids them from acting in any way that could be detrimental to the beneficiaries’ best interest. Trustees must exercise honesty and integrity in every situation involving the trust, and their actions must be free of conflicts of interest.

A breach of fiduciary duty happens when the trustee acts in his or her own interest rather than in the best interest of the trust beneficiaries. A fiduciary cannot use the principal for personal advantage, for example, or use the trust’s assets or property for personal gain.

Penalties for breach of fiduciary duties may include compensatory and punitive damages, which means the fiduciary would have to pay back lost money and may have to pay fines. The fiduciary would also have to deal with the consequences of a criminal act, and could potentially face jail time.

Open and honest communication with the beneficiaries and other parties involved in the trust can help fiduciaries avoid breaches – consulting with an experienced estate lawyer can also help. It is often in the best interest of the fiduciary accused of a breach to contact an experienced attorney for help.

For more information about breach of fiduciary duty in California, consult with Charles D. Stark.