Trustees must manage and invest trust assets carefully and in accordance with the trust’s terms. Investment losses do not automatically make a trustee personally liable, but a trustee can face liability if they breach a fiduciary duty.
What Is a Fiduciary Duty, and What Duties Do Trustees Have?
Trustees are generally not personally responsible for every obligation they take on while managing a trust. Under Florida law, a trustee who properly enters into a contract in a fiduciary capacity and discloses that capacity is generally not personally liable on that contract. However, a trustee may be personally liable for a tort committed while administering the trust or for certain obligations involving trust property when the trustee is personally at fault. The law also allows claims against the trustee in their fiduciary capacity.
A fiduciary duty is the legal responsibility to act in another person’s best interests when managing their money, property, or other assets. A breach of fiduciary duty occurs when a trustee fails to meet legal or trust-based responsibilities owed to beneficiaries.
As a fiduciary, trustees should:
- Follow the terms of the trust.
A trustee must follow the instructions in the trust document when managing or investing trust assets. The trust may limit certain investments or provide specific instructions on how assets should be handled. - Act in the beneficiaries’ interests.
Trustees generally have a duty to put beneficiaries’ interests ahead of their own. Make investment decisions for the benefit of the trust rather than for the trustee’s personal financial benefit. - Consider the trust’s investment goals and risk.
Not every investment is appropriate for every trust. A trustee should consider the trust’s purpose, the beneficiaries’ needs, expected returns, potential risks, and how much money the trust may need to access. - Avoid improper self-dealing or conflicts of interest.
Trustees should be careful about investments or transactions that could benefit them personally. Using trust assets for personal gain or making investment decisions based on a personal financial interest can create serious fiduciary concerns. - Properly manage and monitor trust investments.
A trustee’s responsibilities may continue after making an investment. Depending on the circumstances, the trustee may need to review the investments, monitor their performance, and make reasonable changes when appropriate. Keeping clear records of investment decisions matters when beneficiaries demand an accounting.
Frequently Asked Questions
What evidence can show a trustee made an improper investment?
If you believe a trustee made a bad or improper investment decision, the records surrounding that decision can be important. Some helpful evidence may include:
- Investment statements showing how trust assets were invested and how they performed.
- Trust documents explaining what the trustee was allowed or required to do.
- Emails and messages between the trustee, beneficiaries, financial advisors, or other professionals.
- Financial advice or reports showing what recommendations the trustee received before making an investment.
- Transaction records showing when money was invested, withdrawn, or moved.
- Communications with beneficiaries that may show what the trustee said about the investments.
- Records explaining the investment decision, including why the trustee chose a particular investment.
Can a trustee make decisions without the beneficiaries’ consent?
Yes, a trustee can often make investment decisions without the beneficiaries’ approval. Trustees typically have authority to manage and invest trust assets, subject to the trust document and applicable law. However, that does not mean a trustee can make any decision they want. Trustees generally must follow the trust terms, act in the beneficiaries’ interests, and manage assets responsibly. They may also need to avoid conflicts of interest and monitor investments properly. If the trust requires beneficiary approval for certain decisions, the trustee may need to follow those requirements. The trust’s specific language and applicable state law determine the trustee’s authority.
Can a trustee be personally liable if they followed a financial advisor’s advice?
Possibly, but it depends on the circumstances. A trustee does not necessarily become personally liable every time an investment an advisor recommends loses money. However, the trustee may still have responsibilities when selecting and overseeing the advisor. Beneficiaries can raise concerns if a trustee continued investing in an asset despite clear signs of serious problems, failed to review important financial information, or made a major investment decision without researching the potential risks.
What ways can a trustee breach its fiduciary duty?
A trustee can breach a fiduciary duty in ways that go beyond making a bad investment. For example, a trustee may use trust money for personal expenses, favor one beneficiary over another, ignore trust instructions, or fail to properly protect trust property. Other problems can include refusing to provide information or accountings, taking unreasonable fees, making deals that benefit the trustee personally, or failing to keep good records. A trustee could also face issues if they sell trust property for too little or fail to distribute assets when they should.
Can a Florida trustee be removed?
Yes. Under Florida law, a court can remove a trustee in several situations. This may include a serious breach of trust, ongoing problems between co-trustees that interfere with managing the trust, or a trustee’s unfitness, unwillingness, or repeated failure to administer the trust properly. A court may also remove a trustee after a significant change in circumstances when removal would be in the beneficiaries’ best interests and would not conflict with a material purpose of the trust.
Contact a Florida Trusts and Estates Attorney
If you’re concerned about a trustee’s investment decisions, the trustee may have breached their fiduciary duty. Talking with a trusts and estates attorney can help you understand your options and determine whether the trustee’s actions may have violated their responsibilities. An attorney can also review the trust documents and investment records and explain what steps may be available. Contact our office today for immediate assistance.