Can I Be Personally Liable If I Serve as a Trustee?

Coral Gables trust attorneys

If you recently learned that you were appointed to be the Trustee of a trust, and this is the first time you have served as a Trustee, you probably have questions and concerns. At the top of your list of concerns may be the possibility of being held personally liable if you make a mistake. The Coral Gables trust attorneys at Stivers Law explain personal liability for a Trustee.

What Does the Job of Trustee Entail?

The primary reason that people often appoint the wrong person as their Trustee is that they do not have a firm grasp of the breadth and complexity of the duties and responsibilities of a Trustee. The overall job of a Trustee is to protect and manage trust assets while administering the trust using the trust terms created by the Settlor. The specific duties and responsibilities of a Trustee make for a long list. This list includes everything from investing trust assets to keeping detailed records to resolving conflicts among beneficiaries. The power and authority a Trustee have means that the Trustee contributes directly to the success – or failure – of a trust.

Can a Trustee Be Liable for Mistakes and Errors?

Settlors often appoint the Trustee without giving the matter sufficient thought. As a result, a spouse, best friend, or family member ends up in the position of Trustee despite lacking the type of experience that would qualify him/her to be the Trustee. Successfully administering a trust is best accomplished by someone with a financial and/or legal background. Despite having the best of intentions, a Trustee’s lack of experience could increase the likelihood of making mistakes during the administration of the trust. If you are that Trustee and mistakes are made, you could find yourself being held personally liable.

What Type of Liability Might a Trustee Have?

Mistakes made during the administration of a trust could result from the Trustee’s liability to a third party and/or to the beneficiaries of the trust.  As the Trustee, you will have to interact with third parties on a regular basis, particularly regarding investments made by the trust.  Consequently, you could end up liable for breaching a contract to a third party or for debts incurred in the name of the trust and owed to a third party.  You might also find yourself liable to the beneficiaries of the trust for a wide range of errors or mistakes, including:

  • Failing to distribute trust assets according to the terms of the trust.
  • Failing to pay debts, including taxes, owed by the trust that incurs additional fines that decrease the value of the trust assets
  • Making risky investments that result in a depletion of trust assets
  • Failing to inform the beneficiaries of vital trust business that results in damage to the trust.
  • Creating a conflict of interest that results in losses to the trust
  • Self-dealing

Can a Trustee Prevent Personal Liability?

If you find yourself in the position of Trustee, you undoubtedly want to prevent being held personally liable for mistakes you might make. There are several things you can do to try and limit the possibility of personal liability for mistakes. For example, when any Trustee invests trust assets, the “prudent investor standard” must be used. The prudent investor standard requires the Trustee to only invest in risk-averse options and to consider retention of the principal to be the most important consideration when making investments. The most important thing you can do, however, to try and avoid personal liability is to utilize the advice and assistance of professionals during your time as a Trustee.  Consult with a financial advisor before making any investments using trust assets. In addition, retaining the services of a trust administration attorney will dramatically decrease the likelihood of any personal liability on your part because it will decrease the likelihood of making an error.

Contact Coral Gables Trust Attorneys

For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about Trustee personal liability, contact the experienced Coral Gables trust attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.

Author Bio

Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.

With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialist™ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.

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