In a trust, there are three roles involved: the grantor, the beneficiaries and the trustee. Among these positions, the trustee is responsible for managing the assets within the trust, making them have a fiduciary duty to the trust’s owner and beneficiaries.
A trustee has an obligation to act and decide concerning the grantor’s assets in the best interests of the beneficiaries. They could face severe repercussions if they fail to do so, resulting in a breach of fiduciary duty. This violation could be severe enough to remove and replace a trustee.
What does a breach of fiduciary duty look like?
It is vital to know what a breach looks like, including the following examples:
- Using the assets in the trust for personal benefit and causing losses to the trust value
- Making decisions or actions that violate the trust agreement
- Inadequate documentation of trust activities and other poor practices, such as comingling and having conflicts of interests
- Other behaviors and actions meant to mislead or deceive the other parties
Whether a grantor or a beneficiary, you should pay close attention to details concerning the trust. Doing so can help you notice the signs of a breach early to avoid significant losses.
Is it the only reason to remove a trustee?
Sometimes, you do not need to wait for a breach to happen before deciding to remove a trustee. You can request it if there is proof that the trustee cannot do their duties properly. Other times, the trustee cannot simply do their job effectively, especially if they have a history of issues involving their finances.
Unfortunately, there is no sure way to determine if a person will be a great trustee. Still, you could seek legal advice on placing safeguards to protect your trust or taking action to address a trustee’s breach of fiduciary duty.