Can a Beneficiary Sue a Trustee?

Posted Apr 17, 2022


Trustees have a huge responsibility; they must properly administer and oversee assets in a trust. A trust, in turn, is a fiduciary arrangement in which a trustor, or grantor, gives the trustee the responsibility of managing those assets. 

But this doesn’t mean that trustees are perfect individuals or entities. They can make mistakes, whether deliberate or by accident. The question here is, if you’re the beneficiary of a trust, can you sue that trustee for making those mistakes? 

As with many issues regarding wills, estates, and trusts, the answer is: it depends. You can’t sue a trustee if you’ve been disinherited from a trust. Nor can you bring that individual to court if he or she took a pre-arranged fee from the trust, thereby reducing your inheritance. Trustees are definitely entitled to reasonable payment for their efforts.

But if that trustee is generating problems that might impact the trust, this could require a call to an attorney who is skilled in such matters.

Reasons to Sue

Do you have a legitimate case against your trustee? Possibly, under the following circumstances. 

Breach of Trust

Under this category, the trustee’s actions are violating the terms of the trust. Breach of trust occurs if the trustee distributes the trust’s assets to a beneficiary who might not be entitled to them or invests the trust’s assets in a way that isn’t stipulated under the trust’s terms.

Breach of Fiduciary Duty

We’ve mentioned this before, but a trustee is a fiduciary. This means the trustee has:

  • A duty of care, meaning thoughtful decision-making based on accessible information
  • A duty of loyalty, or acting in good faith and in the best interests of the trust and beneficiaries
  • A duty of confidentiality, in other words, keeping important information secure

A trustee that doesn’t abide by these responsibilities could be problematic for the trust and yourself, as a beneficiary.

Misappropriation or Mismanagement

Perhaps your trustee is paying for activities or things that aren’t beneficial to the trust. Or the trustee isn’t making the right investment decisions to ensure the trust’s maintenance or growth. Definite “no-no’s” are if your trustee is using trust funds to buy a new car, or if they’re putting those funds into poorly performing investments.

Malfeasance or Fraud

Your trustee should not act in a way that might injure you, the beneficiary. One example of this is if the trustee donates the trust’s assets to an organization to which you’re opposed. The same holds true for outright lies; the trustee must not deliberately deceive you by misrepresenting material facts about the trust.

Be Aware Before Heading to Court 

If you see examples of the above, take a pause before contacting a reputable trust attorney. Bringing a suit against a trustee requires specific evidence of wrongdoing. Specifically, the burden of proof is on you. Without absolute proof that a trustee is misbehaving or acting unethically, the court will likely dismiss the suit.

Along those lines, you’re on the hook for legal costs. The court MIGHT reimburse you for legal fees if the suit ends up in your favor. Until and unless that happens, you’re responsible for attorney and other fees associated with the lawsuit.

A beneficiary can sue a trustee under certain circumstances. But it’s important to understand what constitutes a violation of the trust before moving ahead with such an action.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice, meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

Learn Ways To Help Build Long-Term Real Estate Wealth

Get Tips For Managing Real Estate Wealth
Download eBook


Get Tips For Managing Real Estate Wealth

Learn Ways To Help Build Long-Term Real Estate Wealth

Learn new ways to use real estate to pursue your wealth goals.

By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received.