A trustee is entrusted with significant authority over assets that ultimately exist for the benefit of others. That authority comes with substantial legal responsibilities.
When a trustee fails to follow the terms of a trust, uses trust assets for personal benefit, refuses to provide financial information, or otherwise fails to properly administer the trust, beneficiaries may have grounds to take legal action.
In Episode 10 of the Di Pietro Partners Podcast, Kevin speaks with David Di Pietro, founder and managing partner of Di Pietro Partners, about trustee misconduct and breach of fiduciary duty under Florida law.
David discusses the responsibilities trustees have, warning signs beneficiaries should watch for, how trustee removal works, and when a trustee can potentially be held personally liable.
What Does a Trustee Owe the Beneficiaries?
A trustee is responsible for administering a trust according to the terms established by the person who created it.
As David explains in the episode, a trustee is a fiduciary. This creates a heightened level of responsibility that goes beyond an ordinary contractual or business relationship.
Trustees generally must act in accordance with the trust document and administer trust property for the benefit of the beneficiaries rather than themselves.
A trustee may have authority over significant financial decisions, including managing investments, buying or selling property, and making distributions.
However, that discretion does not eliminate the trustee’s fiduciary responsibilities.
How Much Discretion Does a Trustee Have?
The amount of discretion a trustee has depends heavily on the language of the trust.
David explains that Florida law and many trust documents provide trustees with relatively broad authority. Depending on the trust, a trustee may be responsible for decisions involving:
- Stocks and other investments
- Real estate
- Trust property
- Financial management
- Distributions
- Other trust assets
Broad discretion does not mean unlimited discretion.
Trustees still have a duty to administer the trust appropriately and may face consequences when their decisions harm the trust or violate their fiduciary obligations.
What Is Trustee Misconduct?
One of the clearest examples of potential trustee misconduct is self-dealing.
This can become particularly important when the trustee is also one of the beneficiaries.
A trustee cannot use their position to benefit themselves at the expense of other beneficiaries. For example, problems may arise when a trustee uses trust assets for personal benefit or makes decisions that unfairly favor their own interests.
Other potential problems discussed in the episode include failure to provide accountings, failure to communicate with beneficiaries, failure to follow the terms of the trust, and imprudent management of trust assets.
Trustee Accountings and Financial Transparency
Accounting is an important part of trust administration.
David explains that trustees generally have responsibilities related to providing beneficiaries with information about trust finances and administration.
Proper accounting also creates transparency. Beneficiaries should be able to understand how trust assets are being managed and where money is going.
When a trustee repeatedly refuses to provide financial information or an accounting, beneficiaries may have reason to investigate further.
Warning Signs of Trustee Misconduct
Beneficiaries do not necessarily know everything happening behind the scenes with a trust. That makes certain warning signs particularly important.
According to David, three significant red flags include:
- Failure to provide an accounting
- Failure to communicate with beneficiaries
- Failure to follow the terms or wishes expressed in the trust
A trustee who consistently ignores beneficiaries or refuses to explain what is happening with trust assets may warrant closer scrutiny.
Not every disagreement means misconduct has occurred. However, persistent secrecy or unexplained financial activity can justify asking questions and potentially seeking legal advice.
Can a Trustee Be Removed in Florida?
Yes, but removing a trustee generally requires court involvement.
David explains that a trustee is entitled to due process and can defend against allegations made during trust litigation.
That means removing a trustee is not necessarily immediate or simple. The parties may engage in discovery and litigation before a court determines whether removal is appropriate.
Trustee removal may become an issue when there is evidence of misconduct, failure to properly administer the trust, self-dealing, or other serious breaches of fiduciary responsibility.
Does Trustee Misconduct Have to Be Intentional?
No.
One important point from the episode is that trustee liability does not necessarily require malicious or intentionally fraudulent behavior.
Problems can also arise from a failure to act or from decisions that were not sufficiently prudent and caused financial harm to the trust.
This is one reason accepting the role of trustee should not be taken lightly. Trustees may be responsible for managing substantial assets and making decisions that affect multiple beneficiaries.
Can a Trustee Be Personally Liable?
Potentially.
Because trustees serve as fiduciaries, serious breaches can expose them to personal liability.
David emphasizes that serving as trustee is a significant responsibility. A person accepting the position should understand both the authority they are receiving and the obligations that accompany it.
Trustees are generally entitled to compensation for their work, but accepting compensation does not diminish their responsibility to properly administer the trust.
Why Blended Families Can Lead to Trust Disputes
Not every trust dispute begins with obvious misconduct.
David discusses a common scenario involving blended families.
For example, someone in a second marriage may create a trust intended to benefit both a surviving spouse and children from a previous marriage. After that person dies, the beneficiaries may find themselves sharing financial interests despite having very different priorities.
That can create friction even when the trustee has not necessarily done anything wrong.
In some situations, the parties may ultimately seek to modify, terminate, or otherwise resolve the trust arrangement rather than remain financially connected for decades.
What Should You Do If You Suspect Trustee Misconduct?
David recommends addressing potential problems early.
Documentation can become particularly important in a trust dispute. Beneficiaries who believe something is wrong should keep records of communications, financial information they receive, requests for accountings, and other relevant documentation.
Waiting for a disagreement to become a major financial dispute can make the situation more complicated.
Speaking with an experienced Florida trust litigation attorney early can help a beneficiary understand whether the trustee’s conduct is actually improper and what legal options may be available.
Speak With a Florida Trust Litigation Attorney
Trust litigation can involve significant financial assets, complicated family relationships, and difficult questions about fiduciary responsibility.
Di Pietro Partners represents parties in Florida trust and estate disputes, including matters involving allegations of trustee misconduct and breach of fiduciary duty.
If you are a beneficiary concerned about the administration of a trust, or a trustee facing allegations regarding your conduct, an experienced trust litigation attorney can help you understand your rights, responsibilities, and available legal options.
Contact Di Pietro Partners to discuss your situation with a Florida trust litigation attorney.