Protecting a Trustee against Beneficiary Challenges

innerCalmWhen people think of trust litigation, they might think about beneficiaries bringing an action to obtain access to or possession of the trust property. However, the trustee may also need legal protection if one or more beneficiaries decide to question how the trustee is managing and administering the trust property.

Beneficiaries can sometimes be more difficult to deal with than the actual duties associated with trust administration. In many instances, beneficiaries have limited knowledge of the laws regarding trusts and the duties of the fiduciary. If beneficiaries decide they simply do not like an action of the trustee, they may choose to file a legal challenge against the trustee, even if it is unwarranted. A trustee does have the legal duty to manage trust assets and administer the trust with the best interests of the beneficiaries in mind, although mistakes may occur and a trustee does not have to jeopardize their personal finances simply because a beneficiary is not pleased.

No fault clauses

There are a number of ways that a trustee can defend against claims regarding trust administration in order to avoid liability. For example, California probate law allows a trust to include an exculpatory provision that limits the liability of a trustee in certain situations.  This can protect trustees if there was no act of bad faith or intentional damage done regarding the trust assets and beneficiaries. This type of no-fault provision is not enforceable in some circumstances, including a breach of trust involving any of the following:

  • Intentional breach;
  • Breach caused by gross negligence;
  • Acts of bad faith;
  • Acts involving reckless indifference for the interests of the beneficiaries;
  • Breach resulting in a profit for the trustee.

If none of the above are true, an experienced lawyer can use a no-fault clause to help protect the trustee against legal attacks by beneficiaries.

Financial costs of defending against beneficiary claims

Even if a trustee has a valid defense against claims by a beneficiary of mismanagement or breach of duty, mounting a defense in court can be costly. A trustee should not have to use their personal assets to fund the litigation, especially if the claims are unfounded. Fortunately, there are ways that an experienced trust attorney can arrange for the costs to be covered without personal financial responsibility for the trustee. Specifically, trustees often have the authority to utilize trust assets to cover litigation costs and the fees of an attorney to help protect the legal interests of trustees.

Consult with an experienced San Diego trust litigation attorney

If you are a trustee and learn of any legal disputes raised by a beneficiary, your first call should be to a highly skilled trust lawyer who can begin defending your rights. There are many ways to protect a trustee from financial losses and legal liability. The particular defenses available in your case will depend upon the circumstances and the nature of the claims you face. Byron K. Husted is a qualified estate planning and litigation attorney in San Diego who understands how to protect a trustee from legal challenges. Please call for assistance today at 619-826-8060.