A Trustee’s Duties In California

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A man was cited as an executor of his aunt’s estate. The aunt passed away leaving a distributable estate consisting of $125,000 cash. The man probated the will and was appointed executor.  Then, the man borrowed $90,000 in cash from the estate ad and invested the money in a natural gas operation, which turned out to be lucrative. Within three months of making the investment, the man sold the interest in the mining operation for $180,000 and repaid the estate the $90,000 he borrowed. However, the man retained the balance of the proceeds for his personal use.

Performing duties and possessing liabilities

The executor is considered a trustee and is liable for breach of the fiduciary duties. A trustee possesses a duty of loyalty to the will beneficiaries. Cal. Prob. Code §16004 provides a trustee has a duty not to use or deal with trust property for the trustee’s own profit or for any other purpose unconnected with the trust. Therefore, doing business with the assets of the will is prohibited, which includes instances in which a trustee is borrowing funds from the estate solely for personal benefit.

If circumstances are similar to the example above, the beneficiaries may:

  • Ratify the transaction after full disclosure is made to all beneficiaries, and
  • Waive the breach, or
  • Recover all the profits made

In addition, an executor may be removed from his position by the beneficiaries for cause in a formal proceeding. In the example above, the man breaches his duty of loyalty to the beneficiaries because he borrowed funds from the estate and profited $90,000 from the investment. The beneficiaries may ratify the transaction after full disclosure or recover the profits earned from his breach. Estate planning attorneys in San Jose provide a sophisticated assessment of the facts surrounding the trustee’s breach of duty to evaluate prospective remedies.

Get knowledgeable guidance from California wills and trusts attorneys

By seeking help from a lawyer at Temmerman, Cilley & Kohlmann, LLP, you can obtain information from highly-skilled estate planning lawyers who are dedicated to providing superior representation. Our office represents clients throughout San Jose and Pleasanton.