Trust & Estate Litigation · Haute Lawyer Network
What Is Breach of Fiduciary Duty by a Trustee?
Last reviewed: June 2026
A fiduciary is a person who holds a position of trust and is legally required to act in the best interests of another person. A trustee is one of the most clearly defined fiduciaries in the law — they hold legal title to trust assets and are obligated to manage those assets solely for the benefit of the trust's beneficiaries.
Breach of fiduciary duty occurs when a trustee violates one or more of the legal duties they owe to the beneficiaries. It is the most common basis for trust litigation and can result in the trustee being removed, ordered to restore lost assets, and held personally liable for damages.
The Core Duties of a Trustee
Duty of loyalty — the most fundamental duty. The trustee must act solely in the interests of the beneficiaries and must avoid any conflict of interest. Self-dealing — where the trustee personally benefits from trust transactions — is a classic breach of the duty of loyalty.
Duty of prudent administration — the trustee must manage trust assets as a prudent investor would — diversifying investments, avoiding speculative risks, and making investment decisions in accordance with the Uniform Prudent Investor Act as adopted in most states.
Duty to inform and account — trustees must keep beneficiaries reasonably informed about trust administration and provide regular accountings — statements showing trust income, expenses, distributions, and asset values.
Duty of impartiality — when a trust has multiple beneficiaries — such as current income beneficiaries and remainder beneficiaries — the trustee must balance their interests fairly, not favoring one class at the expense of another.
Duty to keep trust property separate — trust assets must be kept separate from the trustee's personal assets. Commingling trust funds with personal funds is a serious breach.
Common Examples of Breach
Selling trust property to the trustee personally or to the trustee's family members; borrowing money from the trust; failing to invest trust assets prudently; investing in speculative assets that lose value; paying excessive trustee fees; failing to account for trust assets; making distributions to favored beneficiaries while ignoring others.
Remedies for Breach of Fiduciary Duty
Restoration of lost assets — the trustee must restore any assets lost as a result of the breach, including investment losses caused by imprudent decisions.
Disgorgement of profits — if the trustee personally benefited from the breach, they must disgorge those profits to the trust.
Removal — the court can remove the trustee and appoint a successor.
Surcharge — a monetary judgment against the trustee personally for damages caused by the breach.
Constructive trust — in cases of self-dealing, the court may impose a constructive trust on assets improperly obtained.
Frequently Asked Questions
What is the difference between a mistake and a breach of fiduciary duty?
A trustee is not liable for every investment loss or every imperfect decision. The standard is whether the trustee acted as a prudent investor would have acted — not whether the decision turned out well. A bad investment decision made after reasonable research and deliberation may not be a breach. The same decision made without investigation, or made for self-interested reasons, likely is.
How do I find out if a trustee is breaching their duties?
Start by formally requesting an accounting from the trustee in writing. A proper accounting shows all trust income, expenses, distributions, investments, and asset values. Unusual transactions, excessive fees, unexplained disbursements, or poor investment performance without explanation are warning signs that warrant further investigation.
Can co-trustees be liable for each other's breaches?
Yes, in some circumstances. A co-trustee who knows about another co-trustee's breach and fails to take action to remedy it may be liable for that breach. This is one reason co-trustee arrangements require active participation and communication — silent co-trustees who rubber-stamp a managing co-trustee's decisions may not be protected.
Is there a time limit for bringing a breach of fiduciary duty claim?
Yes. Statutes of limitations for fiduciary duty claims vary by state, typically ranging from 2 to 6 years from the date the beneficiary knew or should have known about the breach. Some states have longer limitations periods for fraudulent breach. Consult an attorney promptly if you suspect a breach.
Can a trustee be criminally prosecuted for stealing from a trust?
Yes. Theft of trust assets is a crime — typically charged as theft, embezzlement, or misappropriation of fiduciary funds depending on the state. Criminal prosecution is separate from the civil trust litigation process and can proceed simultaneously.
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