Trustee Breach of Trust

Release Trap

  • The waiver and release problem

The Trustee wants to be done with the Trust administration and decides to have the beneficiaries sign a waiver and release so a final Trust distribution can be made. But waivers and releases are not always the best way to proceed in Trust matters because they can be challenged and overturned by a beneficiary after the Trust assets are distributed.

The law places a heavy burden on Trustees to ensure releases are not obtained unfairly. Since Trustees are in a position of power over beneficiaries (and control the purse strings of the Trust), any waiver or release obtained from a beneficiary in favor of a Trustee is suspect.

  • How waivers and releases fail

For starters, Probate Code section 16004.5 states that any release that is conditioned on a beneficiary receiving an otherwise required Trust distribution is invalid. And that scenario happens all the time—a Trustee demands a signed release before making a distribution. That is a clear recipe for disaster because the release will fail and a future lawsuit will occur.

Furthermore, Probate Code section 16464, provides more ways in which to set aside a release, which include:

  1. the incapacity of the beneficiary,
  2. where a release was obtained by a bad act of the Trustee,
  3. where the release involves a bargain that is not “fair”, or
  4. where the beneficiary was not fully informed of his rights and all the necessary material facts.

That’s a lot of ways out of a release!

  • So how do you properly end a Trust administration?

Since a release can be overturned many different ways, the best approach is to seek court approval of a Trust accounting because that closes the door to future lawsuits by the beneficiaries without any doubt. But if an accounting is out of the question, then at least approach a release in the best way possible.

First, never condition a release on the distribution of Trust assets. In fact, make a preliminary distribution of assets BEFORE asking for a release. That will prove that the Trust distribution was not conditioned on a distribution of Trust assets.

Second, have the beneficiary review the release with a lawyer of their choosing so they cannot complain later of not understanding the implications of the release.

Third, disclose as much information about the Trust and Trust assets to the beneficiary before asking for a release. Since a release can be set aside if the beneficiary was not fully informed of all rights and material facts, it is imperative that the Trustee disclose all known information to a beneficiary before asking for a release. And the disclosure should be done in writing so you have proof of what was disclosed.

  • Don’t sign what you don’t understand

If you are a beneficiary and have been asked to sign a release or waiver under suspicious or unfair circumstances, do not sign anything until you have a lawyer review the release with you. This is especially true where the Trustee conditions a Trust distribution to you on your signing a waiver and release.  While there are ways to overturn a release, you do not want to have the burden of doing so if you don’t have to.

  • The bottom line

Court-approved accountings are the best protection a Trustee can have against later beneficiary lawsuits. But if you want to go the waiver and release route, at least be sure to follow the rules and create a waiver and release that is likely to be upheld if you are ever sued by a beneficiary in the future.




Is Your Trustee-2

  • The duty of impartiality: Is your Trustee treating you equally?

Imagine a world where a Trustee treats each of the Trust beneficiaries equally. That is supposed to be the world we live in for ALL California Trust matters (California Probate Code section 16003), but it does not always work that way. All too often a Trustee will decide to treat some beneficiaries differently than others. For example, a beneficiary who complains may be treated more poorly than the other beneficiaries who keep quiet. If the Trustee is a sibling, then inequality can run rampant based on sibling rivalry alone.

When beneficiaries have disagreements among themselves, the Trustee is supposed to take a neutral stance and not advocate one beneficiary’s position over the others. There are some Trustees, however, who just can’t resist joining the fight.

Treating all of the beneficiaries equally is not always an easy task. This is especially true when you have more than a couple beneficiaries. The more people involved, the more disparate viewpoints you have. That means more chances for disagreements with the Trustee. When family, money, and heirlooms are at stake, things can get out-of-hand quickly.

  • What’s a Trustee to do?

For Trustees, it takes a good deal of patience. You need to slow down and do things the right way. Start with full disclosure and transparency. If you have conflicting viewpoints, then let the beneficiaries know the problem and ask for their input. The Trustee ultimately makes the call, but asking for advice and consent of the beneficiaries never hurts. It makes the beneficiaries feel involved and they just might come up with a workable solution.

If that does not work, then seek the court’s help. Trustees are allowed to petition the court for instructions on what to do. When a Trustee cannot act for fear of disfavoring one of the beneficiaries, the court can intervene and make the decision instead. This process allows each of the beneficiaries to weigh in with their thoughts and arguments on the issue. And the Trustee can remain neutral and allow the process to guide the way.

  • What’s a beneficiary to do?

For beneficiaries, you have no control over a Trustee. The only way to force a Trustee to behave is to seek court assistance. Beneficiaries have the right to petition the court for instructions to the Trustee. This process allows the court to review the issue and then order the Trustee to act, or not act, based on the evidence presented.

In the worst of cases, the Trustee can be removed and a new Trustee appointed who can act with the proper impartiality in mind.

With the court’s help, the duty of impartiality can be successfully navigated in nearly any Trust matter.

Trustee_Time to Pay Up

When a California Trustee breaches his duties of Trust, there can be damages that must be repaid by the Trustee.  However, not every type of damage is available.  For example, there are no “pain and suffering” type damages in Trust and Will cases.  In this video, partner Keith Davidson discusses the finer points of Trust damages. For more information, click this link:

Trustee_ It's Time to Go!!!

Trustee removal is one of the hardest areas to litigate in California Probate court.  But if you have the right facts, then removal and suspension can be accomplished.  In this video, partner Stewart Albertson discusses the idea of Trustee removal and suspension. For more information, click this link:

Does your Trust Accounting...

As a beneficiary of a California Trust, you have the right to information and a full and complete Trust accounting.  So often, however, this information is never provided to the Trust beneficiaries.  When that happens, it is up to you to force the Trustee to account.  And once you are in Court, you can issue subpoenas to obtain all the back-up information necessary to double check the Trustee’s numbers.

Bad Trustees = Bad Investing!!!

Trustees have a staggering number of duties and obligations when it comes to investing California Trust assets.  The California Uniform Prudent Investor Act outlines these duties, many of which are simply not followed by individual Trustees.  In this video, partner Stewart Albertson discusses the duties of Trust investing for California Trustees.

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Bad Trustees

When a Trustee refuses or fails to properly invest Trust assets, those assets can waste away.  Wasting Trust assets in one of the basis on which you can seek removal of your California Trustee.  In this video, partner Keith Davidson discusses Trustee removal based on wasting Trust assets.

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Where in the World do I file my Lawsuit?

Where do you sue your Trustee?  If you want to sue a Trustee in California, there are two issues you need to consider: (1) jurisdiction, and (2) venue. Jurisdiction is the big question—can this Trustee be sued in California? Venue is the smaller question—where in California must this Trustee be sued?

Jurisdiction — The Big Question

Under Probate Code section 17300, any person who accepts trusteeship of a Trust having its principal place of administration in California submits personally to the jurisdiction of the California courts. In other words, if you choose to become Trustee of a Trust that is being administered in California at the time you take over, then you agree to come to court in California if there is ever a problem in the future.

That is a pretty broad standard. But it gets broader still under Probate Code section 17004, which allows the court to exercise jurisdiction under any basis that can be used for civil lawsuits under Code of Civil Procedure section 410.10. Section 410.10 is California’s so-called Long Arm Statute that allows jurisdiction where people have sufficient minimum contacts with this state. This includes concepts like “in-rem” jurisdiction that allows California to hear cases involving California real property in this state. In short, if you are Trustee of a California Trust or a Trust that has California real property, pack your toothbrush because you’re coming to California if you are ever sued.

Venue — The Small Question

Once jurisdiction is established, you then have to consider where to sue—that’s a matter of venue. Under Probate Code section 17005, the proper county in which to sue a Trustee is where the place of Trust administration is located. The place of administration is where the Trustee resides or where they do business. If you have more than one Trustee, then it is where either of the two Trustees reside or do business. If there is no Trustee, then venue is proper where any assets of the Trust are located. This standard is different from probate estates—where the proper venue is where the decedent resided at the time of death. For Trusts, you go where the Trustee is in order to file suit. If the Trustee is out of state, then follow the Trust assets for filing suit.

We seem to be seeing more instances of people moving out of state after accepting to act as Trustee of a California Trust. Now you know that just because the Trustee is no longer in California, California courts may still be the correct jurisdiction and venue in which to file a lawsuit.

Where's My Share of Mom's Stuff???

Fairly often California Trust and Will lawsuits come down to the tangible personal property–things like photos, family heirlooms, and antiques.  But once one party takes off with these items how do you get them back?  Or how do you force the Trustee to give you the personal items you deserve?  In this video, partner Keith Davidson describes the process of forcing distribution of tangible personal property.