Is a trustee personally liable for debts of a trust?
Asked by: Llewellyn Jacobi | Last update: December 5, 2025Score: 4.7/5 (61 votes)
Who is Liable for Trust Debts? To begin, trustees are not personally responsible for the debts of a trust such as a mortgage on a trust property, outstanding loan from a promissory note or even medical and utility bills. You, as trustee, do not have to pay these bills personally.
Can trustees be held personally liable?
Trustees may be personally liable if the assets of the charity are not sufficient to meet the indemnity. But only the people who are trustees at the time the tort was committed can be made liable in this way, unless successor trustees accept the liabilities of their predecessors.
Can a trustee be personally sued?
Can a beneficiary sue a trustee if the trustee has breached their fiduciary duties, committed misconduct or harmed the trust? The short answer is yes. Trust beneficiaries can bring a claim against the trustee, so long as they have a valid reason.
Who holds a trustee accountable?
Trustees must follow the terms of the trust and are accountable to the beneficiaries for their actions. They may be held personally liable if they: Are found to be self-dealing, or using trust assets for their own benefit.
What happens if a trustee makes a mistake?
Typically a trustee is liable to the beneficiaries when he or she commits a breach of trust harming the trust or its beneficiaries. California Probate Code §16440(a) provides that a trustee is chargeable for a breach of trust that results in a loss in value of the trust estate, a profit made by the trustee, or a loss ...
Are Trustees Liable for Paying Trust Debts?
Can a trustee go to jail for stealing from a trust?
Per California law, embezzling trust funds or property valued at $950 or less is a misdemeanor offense and is punishable by up to 6 months in county jail. If a trustee embezzles more than $950 from the trust, they can be charged with felony embezzlement, which can result in a 3-year jail sentence.
Who holds the real power in a trust, the trustee or the beneficiary?
This is a fundamental concept of trust law: the separation of legal and equitable title. In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries.
What cannot a trustee do?
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
Who can override a trustee?
Removal by the trustor
A trust agreement should state the circumstances under which a trustee may be removed by the trustor. Trust agreements usually allow the trustor to remove a trustee, including a successor trustee. This may be done at any time, without the trustee giving reason for the removal.
Who monitors the trustee of a trust?
Trustees are not usually subject to court supervision (unlike executors in court supervised probates). Trustees, and Special Trustees and Trust Protectors are the persons entrusted with the proper implementation of a Trust in a managerial or oversight capacity.
Can a trustee sell property without all beneficiaries approving?
Under California Probate Law, a trustee generally has the authority to sell trust assets without obtaining approval from all beneficiaries. More importantly, it is recommended that trustees seek consensus and secure written agreements. This will help alleviate disputes or legal challenges.
How much does it cost to contest a trust?
Depending on the complexity of the case, it may cost anywhere from a few thousand dollars to $100,000 or more to dispute the terms of a trust.
Can a trustee withhold money from a beneficiary?
As previously mentioned, trustees generally cannot withhold money from a beneficiary for no reason or indefinitely. Similarly, trustees cannot withdraw money from a trust to benefit themselves, even if the trustee is also a beneficiary.
Who is liable for the debts of a trust?
As one would likely guess, the trust itself is responsible for its own debts. The trustee's role is to manage the trust, not personally bankroll it. That means, so long as the trust has cashflow, then those funds are to be used to address the trust's debts and expenses, with the trustee writing the checks.
What are the personal liabilities of a trustee?
Trustees can be held personally liable for any harm caused by their actions or inactions, leading to costly legal fees to defend themselves and potentially to pay other parties legal fees.
What is a trustee limitation of liability?
A standard clause for use in contracts entered into between a trustee and one or more third parties that limits the personal liability of the trustee, and third party creditors' recourse, to the extent of the trust assets, together with extensive drafting notes and guidance.
How much power does a trustee have over a trust?
The trustee usually has the power to retain trust property, reinvest trust property or, with or without court authorization, sell, convey, exchange, partition, and divide trust property. Typically the trustee will have the power to manage, control, improve, and maintain all real and personal trust property.
How difficult is it to remove a trustee from a trust?
It can take up to a year or longer to remove a trustee from a trust. That said, if there are concerns that a trustee could cause harm to the trust while trustee removal litigation is taking place, then the court may suspend them until it can decide the case.
Can you sue a trustee for negligence?
Negligence can constitute a breach of fiduciary duty because trustee misconduct can include a range of conduct, both intentional and unintentional (or negligent), committed by a trustee that results in loss to trust assets. Trustee malfeasance can be grounds for removing a trustee or filing a suit against them.
Can a trustee take all the money?
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
How do you hold a trustee accountable?
In order for the beneficiary to hold the trustee accountable, the beneficiary must have information about what the trustee is required to do and what the trustee actually does. Thus, the trustee has a duty to account and to inform.
What were the trustees not allowed to do?
Trustees could not receive a salary, own land in the colony, or hold public office in Georgia. They accepted this trust and adopted an official motto, “Not for ourselves but others.” This fanciful view of life in Georgia appeared in a 1733 pamphlet published by the trustees to encourage support for the colony.
Can a trustee steal money from a trust?
Yes, when a trustee steals from a trust, they are in effect also stealing from beneficiaries. This is because beneficiaries are supposed to ultimately inherit all the assets contained in the trust.
What are the downsides of being a trustee?
When you become a trustee, you take on a serious obligation and serious personal liability. By law, you now owe a “fiduciary duty” both to trust itself, and more importantly, to the trust's beneficiaries. Beneficiaries are the people who get stuff from the trust.
Can a trustee ignore a beneficiary?
A trustee may withhold money or assets from a beneficiary if they must focus on other responsibilities surrounding the estate. For example, if the estate becomes subject to a tax audit or litigation arises, a trustee may refuse to give beneficiaries their share of the assets until these issues are resolved.