January 15, 2013
Beneficiaries May Sue Trustee For Breach of Fiduciary Duty
William and Mary Giraldin married in 1959. At the time that they married, they both had a number of children. William had four and Mary had three. During the course of their marriage, they had twins, Timothy and Patrick. In 2002, William created a trust, and nominated his son Timothy to be the trustee. William was the sole beneficiary of the trust throughout his life, Mary was suppose to become the sole beneficiary if she had survived him, and the children were to take equally from the trust following the death of both parents. William made a bad investment when he decided to invest "millions of dollars in a company founded by his Patrick and co-owned by Timothy." The stock in the company did bad and a sizable portion of the investment was lost. Four other children of William brought suit against Timothy claiming that he breached his fiduciary duty to their father. In addition, the plaintiffs claim that Timothy squandered away their father's inheritance solely for his own enrichment, which deprived the other beneficiaries of the trust. The trial court agreed with the plaintiffs but the court of appeals reversed. The court of appeals stated that the "plaintiffs lacked standing to sue because Timothy's fiduciary duties as trustee were owed solely to William and not to the other beneficiaries."
In Estate of Giraldin, the California Supreme Court determined that the plaintiffs did have standing to sue if the trustee breached his fiduciary duty to the settlor during the settlor's life. The court based its decision on the probate code and other legal principles to come to the determination that there was no law that denied the plaintiffs that right.
See Linda M. Monje, Beneficiaries Of Trust Have Standing To Sue Trustee For Breach Of Fiduciary Duty That Occurred During Settlor's Lifetime, JDSupra Law News, Jan. 14, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
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