There are many contexts in life where individuals and businesses don’t have direct control over their money or other property. Instead, we trust another party to handle it for us. This party is often a professional, such as a financial advisor or stockbroker, who is supposed to protect your assets and increase their value in some cases. Most of all, they must treat the owner’s assets in the owner’s best interests.
This legal obligation is called a fiduciary duty. A fiduciary is any person or business that handles another party’s property for them. The trustee of a trust is a common example. They don’t own the property contained in the trust. But they control those assets with a duty to maintain them in the beneficiary’s best interests. This includes making sure all applicable taxes get paid, repairs for real property like a house are made, and investments are made to help ensure that the trust can continue making payments to the beneficiaries according to the trust’s terms.
How a trustee can violate their fiduciary duty
As a fiduciary, the trustee is allowed to control the trust’s assets in the beneficiary’s best interests only. Actions like self-dealing (acting in one’s own best interests, not the beneficiary’s in a transaction) and embezzlement (using assets from the trust for one’s own benefit, such as stealing or “borrowing” cash from a bank account) breach that duty. In California, discovering a breach of fiduciary duty gives the beneficiary the right to sue the trustee. Often, the beneficiary will seek compensation for damages and the trustee’s removal.
Such matters can be complex and emotional, especially when the trustee and beneficiary are related. Both sides need sound legal guidance to reach a fair resolution.