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Can a Remainder Beneficiary Sue a Trustee?

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Gavel | Civil Litigation AttorneysA revocable living trust may have certain advantages over a last will and testament.  Namely, a trust may help avoid probate, which can often be time consuming and costly.

The trustee of the trust is responsible for carrying out the instructions of the trust, established by the trust’s creator, or settlor.  The trustee has a fiduciary duty toward the settlor, meaning that he or she is obliged, among other things, to manage the trust as directed by the settlor in the trust document.  Failing to do so can open the trustee to liability for his or her actions.  Read our article to learn more about trustee’s duties and trust disputes.

But does a trustee ever face liability for his or her actions affecting the remainder or residual beneficiaries (i.e., the persons or entities who benefit from the trust only after the settlor passes away)?

Typically, trustees have no duty to the remainder beneficiaries while the settlor is still alive.  As long as they are acting according to the settlor’s wishes and fulfilling their fiduciary duties to the settlor, they are not liable to the remainder beneficiaries for actions taken during the settlor’s lifetime.

However, a recent California court ruling has examined the scope of this rule.  In the case In re Estate of Giraldin, the remainder beneficiaries sued the trustee for, they claimed, squandering the settlor’s savings and thereby depriving the beneficiaries of any remainder benefit from the trust.  The California Supreme Court found that, under California law, “if the trustee does not act in accordance with the settlor’s directions, the trustee may be liable to the beneficiaries.”

Although remainder beneficiaries may not have legal standing to sue the trustee for a breach, during the settlor’s lifetime, of a fiduciary duty to themselves, according to the Court in Giraldin, they can sue on behalf of the settlor after his or her death, to the extent that the breach of duty to the settlor injured the interests of the remainder beneficiaries.

If you have questions about this case and how it affects your trust—whether you are a settlor or beneficiary, contact the experienced trust law attorneys at Berk Law Group, P.C. in Scottsdale. We’d be happy to try to answer your questions about your legal rights.

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About George Smith

George Smith has a broad, interdisciplinary practice in the state and federal courts including litigation of commercial and business disputes, real estate disputes, personal injury cases and family law matters. He prides himself on providing not only legal solutions and advice, but also practical solutions and advice to his clients. George Smith's Google+ Profile

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