Detailed Answer
Under California law, trustees owe beneficiaries strict fiduciary duties, including loyalty, impartiality, and prudent administration of trust assets. Misuse of trust funds—such as self-dealing, embezzlement, or unauthorized loans—breaches those duties. Beneficiaries have several legal pathways to address and rectify such breaches.
1. Identify the Breach of Fiduciary Duty
A trustee breaches fiduciary duties by:
- Commingling personal and trust assets
- Self-dealing or profiting without consent
- Failing to invest or manage assets prudently
- Withholding required accountings or reports
2. Demand an Accounting
Under Prob. Code § 16060 and § 16061, a trustee must provide beneficiaries with a written accounting on demand or at least annually. If the trustee fails to do so, you may petition the court for an order to compel production of records.
3. Petition for Removal of Trustee
Beneficiaries can ask the probate court to remove a trustee for cause—such as misappropriation of funds—under Prob. Code § 15642.
4. Seek a Surcharge or Restitution
If the trustee converted or wrongfully withheld trust property, the court may surcharge (charge) the trustee for losses under Prob. Code § 16420. This remedy forces the trustee to reimburse the trust for the value of the misused assets plus interest.
5. Mind Statutes of Limitations
Time limits apply. Generally, actions against a trustee for breach of trust must be filed within four years after you discover the misuse (see Prob. Code § 16460).
Helpful Hints
- Keep detailed records of communications and transactions.
- Review the trust document for specific notice or dispute procedures.
- Consider mediation or settlement discussions to minimize costs.
- Consult a licensed attorney promptly to protect your rights.
- Act quickly to avoid missing critical deadlines.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney to address your specific situation.