California Trust Accounting Litigation

Trustees must account for their actions in managing a Trust estate. This basic requirement of California law is so often ignored or abused by Trustees, with harmful (and sometimes devastating) results to Trust beneficiaries.

If you are a Trustee, then an accounting is the perfect tool for you to do the following:

  1. Advise your beneficiaries of your actions,
  2. Seek their approval of those actions, and
  3. Have an orderly administration and distribution of the Trust assets without worrying about a lawsuit down the road.

When beneficiaries are kept in the dark about a Trustee’s actions, they usually assume the worst. And that’s for good reason because most Trustees who refuse to disclose information have something to hide. The actions of every fiduciary, whether acting as trustee, executor or conservator, are subject to the strictest scrutiny. Their actions are constantly vulnerable to attacks by beneficiaries. Fiduciaries have a host of duties and liabilities that should govern their actions. They are held to the highest duty of care1 or every act they undertake (and every act they choose not to take).

Attacks against trustees

Whether you are a beneficiary trying to assert your rights and protect your beneficial interests or a Trustee trying to comply with your duties, an accounting is the starting point for determining if the Trustee acted appropriately. Once a proper Trust accounting is filed in Court, then the finances of the Trust can be disclosed. It will be investigated and ultimately decided upon by a Court of law as being either reasonable or not. Where a Trustee abuses his or her power, then the Court has the ability to issue a personal surcharge against the Trustee. It will hold him or her liable for the harms and losses caused by the Trustee’s actions (or lack of action). Where a Trustee acts appropriately, then the accounting can provide the beneficiary assurances that all is well with his or her beneficial interests.

Common allegations against fiduciaries in legal claims by beneficiaries include the following:

  • Misappropriation of trust funds or assets
  • Failure to pay valid debts or liabilities
  • Using funds from the trust for personal benefit
  • Fraudulent, improper, or inadequate accounting

  • Failure to abide by the terms and directions of the trust
  • Making imprudent investments or failing to invest funds at all

Once an accounting is filed with the Court, the Court has the power to decide the issues presented. It is in both the accounting and any objections to the accounting and order the appropriate party to take whatever actions are required to “make things right.” It usually takes place after a trial is conducted by the Court on the accounting issues.