Reasons to Sue a Trustee
Trustees must act in accordance with the terms of the trust and Louisiana law while exercising a fiduciary duty toward the trust beneficiaries. A trustee’s duties include a duty of loyalty. The duty of loyalty is central to the trust and requires the trustee to:
- Act for the benefit of the beneficiaries within the terms set forth in the trust
- Not self-deal or act for their own personal gain
- Maintain confidentiality on matters that are not public record
- Preserve trust property
- Act as a prudent investor
- Keep clear and accurate accounts
Additionally, trustees have a duty of impartiality. The trustee must act in a way that is fair and reasonable for all beneficiaries and may not favor one beneficiary above another.
Potential Legal Outcomes If a Beneficiary Sues a Trustee
If a trustee violates their duties, a beneficiary may seek relief in a Louisiana court. Generally, a beneficiary may ask the court:
To Compel the Trustee to Perform Their Duties
You may ask the court to require the trustee to perform their duties in accordance with the trust document and Louisiana law. For example, you may ask the court to compel the trustee to:
- Provide you with information about the trust
- Provide you with an accounting of the trust property
If the trustee fails to take these actions, your lawsuit may ask that the trustee be removed from the trust, held in contempt in court, and pay any monetary damages that arose from their failure to act.
For Injunctive Relief to Prevent a Trustee From Breaching the Trust
The court has the power to prevent the trustee from taking an action that would breach the trust. As the beneficiary bringing the action, you do not need to meet a standard of irreparable harm to convince the court to issue an injunction.
To Remove the Trustee
A trustee may be removed in accordance with trust documents or by order of the court if the court finds sufficient cause. However, Louisiana law does not clearly define the term “sufficient cause.” Instead, the term has been defined by the courts in a way that is consistent with trust law. For example, a trustee may be removed if:
- The trustee has become disqualified from serving as trustee
- The trustee has become incapable of discharging their duties
- The trustee has mismanaged the trust
- The trustee has failed to perform any duty imposed by law or court order
You only need one of these reasons to seek the removal of a trustee.
For Financial Damages After a Breach of Trust
Louisiana trust law allows beneficiaries to seek monetary damages from a trustee for:
- A loss or depreciation in trust property that resulted from a breach of the trust
- A personal profit the trustee made from a breach of trust
- A profit that the trust would have made if not for a breach of trust
In some cases, your estate litigation lawyer may suggest that you ask the court for more than one of these legal outcomes.
Get Your Questions Answered Before Pursuing Trust and Estate Litigation
As a trust beneficiary, you have a lot at stake in the trust’s administration, but you don’t have any control over the trust. Even though this can be frustrating, you are not helpless. Our experienced Louisiana estate litigation lawyers can explore all of your legal options and provide you with the help you need to protect your rights. Contact us today to learn more.
|
Related links: |
Breach of Fiduciary Duty: The Legal Foundation of Trustee Claims
A trustee in Louisiana owes the trust’s beneficiaries a fiduciary duty — one of the highest obligations recognized under the law. This duty requires the trustee to act solely in the interest of the beneficiaries, to manage trust assets with the care and skill of a prudent investor, to keep detailed and accurate records, to keep trust assets separate from the trustee’s personal assets, to provide regular accountings to beneficiaries, and to follow the terms of the trust instrument. When a trustee fails in any of these obligations, the failure constitutes a breach of fiduciary duty that exposes the trustee to legal liability. Louisiana’s Trust Code, found in Title 9 of the Revised Statutes, defines both the trustee’s obligations and the remedies available when those obligations are violated.
Trustee misconduct takes many forms, not all of which involve intentional wrongdoing. A trustee who makes imprudent investments — concentrating trust assets in a single high-risk investment, failing to diversify, or allowing the portfolio to drift without management — may have breached their fiduciary duty even if they acted in good faith and without any fraudulent intent. A trustee who comingles trust funds with personal funds, even temporarily, commits a per se breach regardless of whether any financial loss results. A trustee who fails to provide required accountings, who refuses to communicate with beneficiaries, or who delays distributions without legal justification may be in breach. The standard for fiduciary duty is high, and conduct that might be acceptable between ordinary parties may constitute a breach in the trustee-beneficiary context.
Intentional misconduct — self-dealing, misappropriation, fraud — represents the most serious category of trustee breach. A trustee who uses trust assets to benefit themselves, who sells trust assets to a related party at below-market prices, who borrows from the trust, or who receives undisclosed compensation from third parties dealing with the trust has committed a disloyal act that Louisiana’s Trust Code treats with particular severity. Courts have broad equitable power to remedy self-dealing, including the power to void the transaction, to surcharge the trustee for all losses and profits derived from the breach, and to remove the trustee entirely. Self-dealing presumptively harms the beneficiaries and shifts the burden of proof to the trustee to demonstrate that no harm occurred — a burden that is very difficult to meet.
What Louisiana Courts Can Order Against a Breaching Trustee
The remedy for trustee breach most commonly sought is surcharge — a court order requiring the trustee to pay money to the trust to compensate for losses caused by the breach. A surcharge may be calculated based on the actual loss to the trust resulting from the breach, the profit the trustee made from the breach, or in some cases both. When a trustee’s imprudent investment caused a loss, the surcharge equals the difference between what the trust would have earned under a prudent investment standard and what it actually earned or lost. When a trustee engaged in self-dealing, the surcharge may equal not only the loss to the trust but also the profit the trustee derived from the transaction — eliminating any incentive for disloyal conduct by taking away the financial benefit the breach produced.
Trustee removal is available when the breach is sufficiently serious that continued administration of the trust by the same trustee is not in the beneficiaries’ interest. Louisiana courts will remove a trustee for serious or repeated misconduct, for hostility between the trustee and beneficiaries that makes effective administration impossible, for incapacity that renders the trustee unable to perform their duties, or for any other cause that demonstrates that keeping the trustee in place would harm the beneficiaries. Removal may be sought as the primary remedy or alongside a surcharge claim. When a trustee is removed, the court appoints a successor trustee to take over administration of the trust — either a trustee named in the trust document as a successor or, if none is available, a court-appointed trustee.
Injunctive relief is available in emergency situations — when the trustee is about to take an action, or is in the process of taking an action, that will cause immediate and irreparable harm to the trust. A court can issue a temporary restraining order that stops the trustee from completing a specific transaction while the beneficiaries seek a full hearing on the merits of their claims. This emergency relief is particularly valuable when a trustee is attempting to sell a significant trust asset, transfer trust funds to a related party, or take other actions that would be difficult to undo after the fact. The standard for emergency injunctive relief is high — the petitioning party must show immediate harm, a likely success on the merits, and that the balance of harms favors the injunction — but it is a powerful tool when the facts support it.
Choosing the Right Legal Strategy for Trustee Misconduct
Not every trustee dispute requires immediate litigation. When the beneficiary’s primary concern is receiving information — a complete accounting, documentation of investment decisions, or records of distributions — a formal written demand for the accounting may resolve the issue without court involvement. Louisiana’s Trust Code gives beneficiaries the right to receive regular accountings and to inspect trust records, and a trustee who fails to comply with a written demand for an accounting has violated a specific statutory obligation. A demand letter from an attorney often produces compliance without requiring a court filing, which saves the beneficiaries the time and expense of litigation and preserves the possibility of a cooperative relationship going forward.
When the breach involves financial loss and the trustee is unlikely to voluntarily compensate the trust, litigation becomes necessary. The beneficiary’s attorney will analyze the trust instrument, the trustee’s investment and distribution records, the applicable standard of care under Louisiana’s Trust Code, and the computation of damages that best captures the harm the breach caused. Expert witnesses — investment professionals, accountants, or trust administration specialists — may be needed to establish both the breach and the damages. The litigation strategy depends on the nature of the breach: a self-dealing case requires different proof and different remedies than an imprudent investment case, and the attorney structures the case accordingly to maximize both the likelihood of success and the recovery available.
Settlement is a realistic outcome in many trustee breach cases, particularly when the trustee is a family member or a professional fiduciary who faces reputational as well as financial consequences from litigation. The beneficiary’s attorney can negotiate a settlement that compensates the trust for the breach, implements changes to the administration going forward, and potentially replaces the trustee with a more suitable successor — all without the uncertainty and expense of a trial. A beneficiary who is represented by a succession and trust attorney experienced with Louisiana trust law is in a far stronger negotiating position than one who attempts to resolve the situation informally, because the attorney can accurately assess the strength of the claim, the likely range of recoverable damages, and what a court would order if the matter proceeded to judgment.