A trustee is personally liable for the breach of fiduciary duties. Fiduciary fiduciary duties include a duty of loyalty, a duty of care, and subsidiary duties. The duty of loyalty requires the trustee to manage the trust solely in the interest of the beneficiaries. The duty of care requires that the trustee be bound by an objective standard of care when administering the trust. Subsidiary rules include the duty of impartiality (no preference between classes of beneficiaries), the obligation not to mix trusts and the personal property of the trustee, and the obligation to inform beneficiaries and be accountable to beneficiaries. The trustee will always have duties, otherwise the trust will become passive and the title will pass to the beneficiaries. If there are several trustees, they have dual responsibility for their own acts, omissions and decisions, as well as those of their co-trustees. At common law, if there were several trustees, each trustee was required to participate in the administration of the trust, unless otherwise specified. If a fiduciary breached his fiduciary duty, the other fiduciaries had to force him to remedy it.
Under UTC, co-trustees are required to exercise due diligence in the performance of the trustee`s duties, unless they are actually assigned to another co-trustee and act by majority vote. UTC allows a dissenting trustee to absolve himself of liability by documenting this dissent. But a dissenting co-trustee must prevent “any serious breach of trust” and “force a co-trustee to remedy a serious breach of trust.” The trustee manages the assets of the trust, an important responsibility. The trustee is appointed either by the settlor or by the court if the settlor has not appointed someone or if the appointed trustees fail. The trustee must voluntarily accept his position. Once accepted, the trustee cannot withdraw without the consent of all beneficiaries or the court. A trust will not go bankrupt for lack of a trustee. Beneficiaries can recover improperly distributed trust assets if they can be traced back to the trust. The claims of the beneficiaries against the trustee do not have a higher priority than the claims of other fiduciary creditors. However, it is the beneficiaries, not the creditors, who are the only parties who can reach the trust. If a trustee illegally disposes of the trust, the beneficiaries can recover the property unless it has fallen into the hands of a bona fide purchaser.
If the trustee has assets in trust and acquires other property with the proceeds of the sale, beneficiaries can argue that they are relying on the newly acquired assets. Since the trustee has legal title to the trust, he or she has fiduciary duties to beneficiaries who have fair title. The trustee must distribute the property in accordance with his instructions and wishes. His three main responsibilities are investment, administration and sales. At common law, the trustee had an express duty not to delegate acts that could reasonably be asked to be performed. However, a trustee could employ agents and lawyers if circumstances warrant. The UTC commentary states that “a trustee may delegate tasks and powers that a prudent administrator with comparable capabilities could justly delegate in the circumstances.” In addition, UTC maintains the fiduciary to a reasonable standard of care, skill and prudence when selecting an agent. Anyone who accepts the position of trustee must be aware of his or her essential responsibility.
However, professionals are available to facilitate these tasks and avoid the liability of the trustee.