A trust lawyer knows that a trustee is responsible for managing the trust and working with the beneficiaries. Trustees have a fiduciary duty, or a legal obligation, to act solely in the interest of the beneficiaries by fulfilling the instructions of the trust as the trustor has required. A trustee must be respectful and careful, loyal, and impartial when serving as the trustee, and cannot take advantage of their trusted position to self-deal or glean benefits for themselves from the trust.
If you have been named as a trustee, developing a full understanding of what the legal obligations are as a trustee can be confusing, especially if you have limited legal experience dealing with trusts. An experienced trust lawyer can assist you.
A Breach of Fiduciary Duty Opens Trustees Up to Personal Liability
Trustees can be held personally liable for acts, or failures to act, as a trustee when the trustee does not carefully and diligently adhere to the trustee’s duties. When a trustee commits a breach of his or her fiduciary duty, the trustee opens themselves up to liability for their actions taken while acting as the trustee. A handful of examples where a trustee can be held personally liable for acts done while acting as a trustee are noted below:
- A trustee may be held personally liable if there is a conflict of interest biasing the trustee’s judgment when it comes to the interests of the trust. Self-dealing or making decisions or investments using the trust’s funds that in some way benefit the trustee either directly or indirectly will expose the trustee to liability.
- A trustee can be held personally liable for any interest and/or penalties that accrue for taxes filings that are made late. Liability exists because filing the appropriate tax forms on behalf of the trust is a responsibility that lies with the trustee.
- A trustee could be held financially liable for losses on stock diversifications on behalf of the trust, or a failure to diversify if losses are substantial. The trustee has an obligation to serve in the best interests of the trust beneficiaries and failing to diversify when stocks are concentrated in a single company can lead to a significant loss in value of the trust.
- A trustee can be held liable for commingling personal finances and the trust finances, especially in situations where the trustee is a family member of the beneficiaries. A trustee can avoid the appearance of impropriety by maintaining clear and thorough accounting records of the finances of the trust, and clear documentation regarding his or her personal finances.
Contact an Estate Planning Law Firm Today
If you are a trustee with concerns about a course of action for the trust you manage, make sure you speak with a lawyer who is skilled and knowledgeable in estate law. Call an experienced attorney, like a trust lawyer from a law firm like Carpenter & Lewis PLLC.