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The consequences of a trustee’s breach of duty by ignorance

On Behalf of | Jan 26, 2024 | Trusts

The fiduciary duty that comes with handling trusts requires trustees to act with competence and knowledge when performing their responsibilities. These qualities allow them to manage the trust properly and efficiently in the beneficiaries’ best interests.

Unfortunately, some trustees fail to adhere to their duties due to a lack of understanding or awareness, resulting in losses in the trust assets and damage to the beneficiaries’ interests.

On the trust: Damage to assets

A breach of fiduciary duty due to ignorance can substantially damage the trust assets. Mismanagement of investments, failure to diversify assets or inattentiveness to tax implications are just a few ways a trustee’s ignorance can financially harm the trust.

On the beneficiaries: Threatened financial security

Beneficiaries rely on trustees to manage the trust in their best interest. A trustee’s ignorance can harm the beneficiaries’ financial security, delay distributions and cause distrust. In these cases, beneficiaries may request the court to remove and replace the trustee or take legal action to recover damages. Accordingly, this can lead to strained relationships and lengthy legal battles.

On the trustee: Personal liability

Trustees must know and understand the terms of the trust agreement and the applicable laws on trust administration. Ignorance, whether genuine or feigned, does not absolve them of this responsibility. When a trustee breaches their fiduciary duty out of ignorance, they may face legal consequences that include personal liability for any losses incurred by the trust.

Courts are often unsympathetic to claims of ignorance, reinforcing the expectation that trustees must proactively educate themselves and seek professional advice on trust administration when necessary.

If you are looking for guidance in carrying out your duties as a trust administrator, it is advisable to seek support from an experienced trust attorney.