A trustee's duty goes far beyond taking physical control over the trust property, for there is no such thing as being a passive trustee, and no trustee has the luxury of sleeping on their trust. When the trustee fails to maintain and control trust assets and handle them in a prudent fashion, it is a fundamental breach of their fiduciary duty. Unless the fiduciary has financial experience or works in the finance industry, he or she should seek professional advice regarding how to invest the trust assets. With the assistance of a skilled investment advisor, the fiduciary can decide how to invest, which assets to sell to produce cash for expenses, taxes or gifts of cash, and how to minimize the income and capital gains taxes.
Under California law, when a trustee improperly manages, distributes, or fails to distribute the trust's assets properly, the trustee can be held personally liable for violating any of the terms of the trust, or for violating California law.
Prudent Investment Tactics
One of the trustee's greatest obligations is to prudently invest the trust property in order to create a productive income for the beneficiaries. Blindly investing the trust's assets is never permissible; the cardinal rule of prudent investment requires that the trustee diversifies the investment portfolio in order to minimize the risk of loss.
One of the most common reasons for trust litigation is when beneficiaries believe that the trustee has either improperly handled trust assets or misappropriated them. For example, the trustee might have made an improper investment and lost all of the trust assets, or the trustee failed to distribute the trust assets fairly, or perhaps the trustee made a loan from the trust to the trustee.
Guidance from Our Los Angeles Trust Litigation Lawyer
When a trustee fails in their fiduciary duty and makes investment mistakes, or handles trust assets irresponsibly, uses trust assets for their own personal use, or otherwise uses trust assets for unauthorized transactions, then he or she can be held legally responsible for any damage done to the trust. In some cases, trustees who have been entrusted with the responsibility to protect another's assets break this trust by knowingly and willingly using funds improperly, and in some cases, the trustee can be in violation of the law.
The California courts have broad discretion when it comes to the legal remedies available in a trust-related dispute. Such remedies may include setting aside decisions of the trustee, removing the trustee, or appointing a temporary fiduciary during litigation, which could result in the trustee's permanent removal.
If you are currently dealing with an issue that involves the improper distribution of trust assets or misappropriation, we urge you to contact a Los Angeles trust litigation lawyer from the Law Offices of David A. Shapiro, P.C.
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