Trustees are individuals or institutions responsible for a trust, managing assets held in the trust for the beneficiaries thereof according to the trust’s terms. Failing to act in the best interests of those who benefit from a trust can lead to a claim of breach of fiduciary duty. The wills, trusts, & probate attorneys in Stamford at Wofsey Rosen, serving Connecticut and New York, offer the following advice on how trustees can avoid a breach of fiduciary duty claim against them.

Understanding the Fiduciary Duties of a Trustee

While the fiduciary powers of a trustee vary from state to state, such as those in  Connecticut and New York. Each state’s general rules apply to the fiduciary duties and powers of a trustee to ensure responsible trust administration. The duties fall under three general categories including:

• Duty of loyalty
• Duty of care
• Duty of full disclosure

Experienced legal guidance is essential to protect your rights as you strive to act in the best interests of a trust. Navigating trust agreement ambiguity and beneficiary conflict is vital. Our team can answer your questions regarding these duties.

Duty of Loyalty

A trustee’s duty of loyalty prevents showing favoritism to a beneficiary or group of beneficiaries over others who may benefit from a trust. A breach of fiduciary duty may occur when a trustee unfairly distributes assets to favor a particular beneficiary. To avoid a breach of fiduciary duty, a trustee must remain impartial, treating each beneficiary fairly according to the terms of the trust.

A trustee’s duty of loyalty also requires them to act in a way that manages a trust in the beneficiaries’ best interests. A conflict of interest or a breach of fiduciary claim against you may occur when beneficiaries believe your actions are for personal gain. A breach in the duty of loyalty can arise when a trustee borrows money from a trust, purchases its assets, or sells assets to the trust without beneficiary consent and complete disclosure of their actions.

Duty of Care

Managing a trust’s assets requires a trustee to act reasonably using skill and diligence. Failing to act with a duty of care may occur when a trustee participates in risky investments, fails to monitor investments diligently, invests for personal benefit, or fails to inform beneficiaries about investment decisions or unfavorable outcomes.

A Stamford, CT, wills, trusts, and probate lawyer with our firm can provide guidance on effectively implementing the duty of care you owe to beneficiaries, remaining within the guidelines set in the trust agreement for investments and distributions.

Duty of Full Disclosure

Trustees have a duty to inform and report accurately about a trust’s administration within a reasonable time frame. A trustee should fully disclose relevant information about the assets of a trust to a beneficiary and the trustee’s management of these assets. Some states may require the entire disclosure of a trust agreement to each beneficiary so that each individual benefitting from the trust is aware of their rights.

Trustees should be knowledgeable of disclosure schedules to provide an accurate accounting of their management of a trust as required by law. Providing statements of asset management along with records of a trustee’s compensation for managing a trust allows for transparency and full disclosure.

Actionable Steps to Avoid a Breach of Fiduciary Duty

Trustees fill a challenging role governed by the laws of the state and a trust’s guidelines. Seeking legal guidance may help you ensure transparency as a trustee and provide the confidence to beneficiaries that your intentions are in their best interests. Consider these vital steps as part of the duties that protect you from a breach of fiduciary claim as a trustee in Connecticut or New York.

• Communicate consistently and equally with beneficiaries, specifically when significant changes occur in a trust. Explain any factors impacting how you come to each conclusion.
• Keep impeccable records detailing every transaction.
• Be transparent with beneficiaries so they know the risk levels associated with your decisions. Disclose any perceived conflicts of interest immediately.
• Listen to beneficiaries’ concerns and respond in a timely manner to their requests for explanations or documentation. Be aware of beneficiary conflicts and consider beneficiary relationships to ensure fair communication and a listening ear for each individual.
• Provide accounting statements on a timely schedule as required by law, whether a portion of a statement is necessary to each beneficiary or a complete reporting of all transactions to each beneficiary.
• Be proactive in seeking experienced legal guidance against potential breaches of fiduciary duty. Laws may also change to accommodate a state’s needs, requiring you to work with a team aware of a dynamic legal landscape.

Contact a Connecticut Wills, Trusts, and Probate Attorney in Stamford

The team at Wofsey Rosen provides experienced legal guidance in trusts, estate administration, and comprehensive trust drafting. If you have questions about fiduciary duties as a trustee in Connecticut or New York or face potential claims for a breach of fiduciary duty, we are ready to help.  If you would like to schedule a consultation, please contact Joseph M. Pankowski, Jr., Esq., at 203-327-2300 or jpankowski@wrkk.com.