In “Law Talk – No. 3″, Lawrence Imel talks about enforcing your rights as a trust beneficiary

The relationship between trust beneficiaries and trustees charged with the administration of a trust’s assets is one particularly susceptible to conflict, largely, because the trustee holds the exclusive power to control and dispose of assets which are equitably owned by the beneficiaries.  Under California law, trustees are obliged to comply with the terms of the trust, treat the beneficiaries with the utmost loyalty, avoid conflicts of interest, preserve trust property and make it productive, and report and account to the beneficiaries.  See Probate Code §§16000-16014; 16060-16062.  Despite the extensive body of law governing trustees, it is not uncommon for trustees and beneficiaries to disagree about whether the trustee is acting in the best interests of the beneficiaries.

Bad blood between trustees and beneficiaries often stems from a trustee’s failure to make disbursements to the beneficiaries and/or failure to provide beneficiaries with information about the trust’s assets, income and expenditures.  A trustee’s failure to account may mask even more egregious breaches by the trustee, including the inappropriate investment, embezzlement or use of trust assets.  Fortunately, the California Probate Code provides trust beneficiaries with important procedures to stop and rectify the foregoing misconduct.

Specifically, trust beneficiaries have standing to ask the court to (1) compel the trustee to render an accounting (Probate Code §17200(b)(7); (2) remove the trustee and appoint a successor trustee (Probate Code §17200(b)(10); (3) order the return of the embezzled property to the trust (Probate Code §850); (4) award damages in an amount twice the value of the embezzled property (Probate Code §859); and/or (5) award damages directly and proximately caused by the trustee’s breaches of fiduciary duty and/or breaches of trust (Probate Code §16420).  In addition, the trust beneficiaries need not worry about the expense of litigation further depleting the trust assets.  A trustee may not use trust assets to defend against claims of misconduct.  The beneficiaries, on the other hand, may seek reimbursement from the trust for the attorneys’ fees and costs that they incurred to prevail against a defalcating trustee. 

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