Trustee Malfeasance Explained

A trustee plays a critical role in the administration of a trust. They have certain duties and obligations that must be fulfilled by law and to carry out the purposes of the trust itself. When a trustee breaches these duties is often referred to as “trustee malfeasance.” In situations where the trustee commits fraud or ignores his or her duties, there can be a significant detrimental effect on the trust and its beneficiaries.

A trust can be either intentionally or accidentally mismanaged, which can give beneficiaries the right to legal action against the trustee. In these situations, it is a good idea to consult with an experienced trust administration or estate planning attorney.

How Does Trustee Malfeasance Happen?

Trustees have certain obligations that they must fulfill based on the trust instrument and the law that applies to their unique role. Examples of trustee malfeasance may include:

  • Intermixing of personal and estate property
  • Engaging in transactions that benefit the trustee to the detriment of the trust
  • Failing to prevent a responsible party from acting in a way that would harm the trust
  • Simply failing to carry out obligations related to the trust
  • Ignoring the trust instrument regarding duties or distribution requirements

High standards are applied to the trustee, and anytime he or she does not adhere to these criteria, trustee malfeasance may occur. Their actions or inactions may result in legal liability.

What to Do If You Suspect Trustee Malfeasance

Mismanagement of a trust may result in court removal of the trustee. If you suspect that a trustee is mismanaging the trust or committing fraud, it is important to speak with him or her about it.

As a beneficiary, you have the right to request an accounting at least on an annual basis and often more frequently. Taking a hard look at the accounting can often signify whether trust assets are being misused. A trust administration attorney can also help you perform an investigation and bring a complaint or lawsuit against the trustee.

Preventing Trustee Malfeasance

The best way to avoid trustee malfeasance is to make a knowledgeable and informed decision when choosing a trustee. Pick someone who has outstanding moral character and displays responsibility. Someone who knows and cares for the beneficiaries may also be a good candidate.

If you are a beneficiary, you can sometimes prevent trustee malfeasance by keeping a close watch on what the trustee is doing. For example, requesting and reviewing the periodic accounting can be extremely helpful to prevent fraud or asset misuse.

If you suspect that assets are being depleted or abused, or if a trustee is not fulfilling their obligations, speaking to an attorney may be a good idea. Contact Luis E. Barreto & Associates, P.A. by calling 305-358-1771.

Luis E. Barreto