Category: Fiduciary Litigation

When someone takes on the role of trustee or executor, that person has a legal duty to act in the best interests of beneficiaries. This responsibility, known as a fiduciary duty, requires them to manage assets honestly, prudently, and without self-interest. Unfortunately, not all fiduciaries uphold their obligations.

Beneficiaries can suffer financial losses or delays in receiving their rightful inheritance when a fiduciary breach occurs. Here’s a look at common types of fiduciary misconduct and the legal options available to address them.

What Is a Breach of Fiduciary Duty?

A breach of fiduciary duty occurs when a trustee or executor fails to act in good faith, mismanages assets, or prioritizes their interests over those of the beneficiaries. Under California law, fiduciaries are held to a high standard, and failing to uphold their duties can lead to legal consequences.

Some breaches are the result of negligence, while others involve intentional misconduct. Either way, beneficiaries have legal remedies to hold a fiduciary accountable.

Common Examples of Breaches of Fiduciary Duty

Misuse of Estate or Trust Funds

Fiduciaries must keep estate and trust assets separate from their own. A clear breach occurs when a trustee:

• Uses trust or estate funds for personal expenses.
• Co-mingles personal and trust accounts.
• Makes unauthorized withdrawals or transfers.

Solution: Beneficiaries can petition the court to demand a full financial accounting. The fiduciary may be removed and held liable for monetary damages if wrongdoing is found.

Failure to Distribute Assets in a Timely Manner

Trustees and executors have a duty to distribute assets according to the terms of the trust or will. Delays may be justified in some cases, but unjustified withholding of funds can harm beneficiaries. Common red flags include:

• No communication about when distributions will occur.
• Delays that benefit the trustee financially.
• Excuses that don’t align with legal requirements.

Solution: Beneficiaries can file a petition to compel distribution. If the fiduciary continues to delay, the court may step in to remove them.

Poor Investment Decisions

A fiduciary must act prudently when managing investments. A trustee who recklessly invests trust funds in high-risk ventures or fails to diversify holdings can be held liable. Examples of breaches include:

• Investing trust funds in personal business ventures.
• Ignoring investment responsibilities, leading to asset depreciation.
• Failing to act in the best financial interest of beneficiaries.

Solution: Beneficiaries can seek legal action to recover losses. Courts may order the fiduciary to reimburse the trust for financial harm caused by poor decisions.

4. Lack of Transparency or Accounting

Fiduciaries must provide regular updates and transparent financial records. Refusing to share account statements or respond to beneficiary requests can indicate misconduct. Warning signs include:

• No annual accounting or financial reports.
• Vague or misleading information about trust activities.
• Concealment of financial transactions.

Solution: Beneficiaries can request a formal accounting through the courts. Further legal action may be necessary if the fiduciary refuses or discrepancies arise.

5. Self-Dealing and Conflicts of Interest

A fiduciary cannot personally benefit from trust or estate transactions. Breaches often involve:

• Selling trust assets to themselves at a discount.
• Hiring their businesses or relatives for paid services.
• Taking loans from the trust.

Solution: Courts take self-dealing seriously. Beneficiaries can challenge these transactions and seek to have them reversed, along with possible damages.

What to Do If a Breach of Fiduciary Duty Occurs

If you suspect a trustee or executor has failed their duties, acting quickly is essential. Here’s what beneficiaries can do:

1. Request a Formal Accounting – California law requires fiduciaries to provide financial reports. If they refuse, legal action may be necessary.
2. Attempt Negotiation – In some cases, concerns can be resolved through mediation or direct communication.
3. File a Court Petition – If misconduct is evident, a petition can be filed to remove the fiduciary or recover losses.
4. Pursue Legal Remedies – Beneficiaries may seek compensation for financial harm, and in cases of serious fraud, the fiduciary could face personal liability.

A fiduciary must protect the estate or trust, not exploit it. Legal action may be taken to protect beneficiaries’ interests if they fail in their responsibilities.

Estate and Trust Litigation Attorneys

Breaches of Fiduciary Duty can result in financial losses, delayed distributions, and mismanagement of assets. If you suspect a trustee or executor is failing to fulfill their duties, Loew Law Group can help. Our firm represents beneficiaries and fiduciaries throughout San Mateo in trust and estate disputes. Contact us today to explore your legal options.

An administrator of an estate or a trustee of a trust owes fiduciary duties to that estate or trust and its beneficiaries. When a fiduciary fails to fulfill their duties in a reasonably prudent manner, a beneficiary may pursue fiduciary litigation against that administrator. The goal of this litigation may be to recover compensation for financial losses caused by the fiduciary’s actions or to remove the fiduciary from their role. Here are some of the most common causes of fiduciary litigation.

Breach of Fiduciary Duty

Estate administrators and trustees owe fiduciary duties to the estate or trust and its beneficiaries. These duties include loyalty to the estate/trust, an obligation to act in good faith and fairly with beneficiaries, and to put the interests of the estate/trust ahead of the fiduciary’s interests. However, fiduciaries of estates and trusts can breach their legal duties in various ways, such as:

• Engaging in self-dealing to benefit oneself at the expense of the estate or trust, such as by charging excessive management fees or usurping financial opportunities
• Having a conflict of interest
• Favoring one beneficiary over another without reasonable justification
• Failing to disclose material information
• Mismanaging assets

Disputes Over Management of Assets

Beneficiaries may file litigation against a fiduciary over allegations that the administrator or trustee mismanaged the estate’s or trust’s assets. Allegations of mismanagement may include failing to maintain accurate records, not maintaining assets such as real estate, embezzling funds, or making poor investment decisions. Mismanaging assets may lead to beneficiaries receiving less from the estate or trust than they would have otherwise received absent the fiduciary’s mismanagement. 

Conflicts of Interest

A fiduciary may have a conflict of interest that could subject them to litigation. Examples of conflicts of interest in trust and estate management include a fiduciary acting for personal gain by receiving excessive compensation for their service or having the trust or estate engage in business transactions with entities owned by or affiliated with the fiduciary. Other conflicts of interest include favoring one beneficiary over another without a reasonable basis, such as by distributing to one beneficiary but not another. Conflicts of interest can lead to litigation to recover assets or funds improperly siphoned off by a fiduciary or to compel the fiduciary to balance out favoritism towards another beneficiary. 

Alleged Fraud or Misrepresentation

Fiduciaries may face litigation for alleged fraudulent activities, such as forging documents, intentionally keeping inaccurate records, providing false or misleading information, or omitting material information. Consequences of fraudulent actions by a fiduciary can include a compensation award to the estate/trust or a beneficiary for the financial harm caused by the fiduciary’s actions or a court order removing the fiduciary from their role. 

Failure to Act in Good Faith or with Due Care

Beneficiaries may file lawsuits against fiduciaries when they fail to act in good faith or with due care. This duty requires a fiduciary to take reasonable, prudent actions. Breaches of the duty to act in good faith and with due care can include consciously disregarding the adverse consequences of a specific action, failing to seek professional assistance with administration, or not acting in the beneficiaries’ best interests. 

Steps to Avoid Fiduciary Litigation

Fiduciaries can reduce the risk of ending up in litigation by following critical tips such as:

• Maintaining thorough documentation of the estate’s or trust’s assets and all transactions taken on behalf of the estate/trust
• Practicing clear communication with beneficiaries and providing them with all relevant information
• Seeking professional support for complex fiduciary responsibilities, such as financial accounting, asset appraisals, investment decisions, and asserting or defending legal rights
• Conducting regular audits to maintain transparency in decision-making

Contact a Fiduciary Litigation Attorney Today

Do you believe an estate administrator or trustee has violated their fiduciary obligations? Alternatively, has a beneficiary of an estate or trust you administer accused you of breaching your fiduciary duties? In either scenario, you need experienced legal counsel to protect your rights and interests. Contact Loew Law Group today for an initial case evaluation with a fiduciary litigation lawyer to discuss your options for pursuing a favorable resolution to your litigation matter.