Trustees and executors who are appointed to manage estates and trusts have a legal obligation to be accountable for their actions, and California has specific laws to regulate this. Fiduciaries, including Certified Public Accountants (CPAs), are held to strict regulations and scrutiny, and must adhere to the highest duty of care when carrying out their responsibilities.
All fiduciaries must maintain an organized management and distribution of assets, keep beneficiaries informed of actions taken, and seek their approval when appropriate. Failure to do so may result in legal action brought by beneficiaries or creditors.
The most common types of legal claims brought against trustees and executors include misappropriation of assets, failure to pay liabilities or debts, inadequate or fraudulent accounting, irresponsible investment of assets, failure to comply with the trust’s terms, and use of trust funds for personal benefit. Beneficiaries who feel that they did not receive assets they are entitled to may sue the trustee or executor.
If there is suspected abuse of power, beneficiaries or creditors may initiate an accounting to determine if the trustee acted according to the law. The first step is to file a trust accounting in court, and an accountant can provide the necessary assurances. The court may order one of the parties to undertake corrective actions, which may include going to trial.
Lawyers and accountants who assume fiduciary responsibilities should be aware of California’s Interest on Lawyers’ Trust Accounts (IOLTA) program. California attorneys that manage certain types of client funds must follow IOLTA guidelines, and attorneys who assume fiduciary duties must not engage in unauthorized practice of law. Violation of these guidelines may lead to legal action.
If a fiduciary is found liable for causing harm, the court may award damages, restitution, taxes and penalties, interest, equitable relief, and attorney’s fees to the plaintiff. Insurance companies may cover litigation costs if the practitioner was performing services for which they were not licensed. To protect themselves from future litigation, fiduciaries should contact their insurance company before taking on the responsibility and work to build trusting relationships with their clients.
When a trustee or executor becomes involved with legal action, California state laws require that they be represented by a licensed attorney. At Abir Cohen Treyzon Salo, LLP, our experienced Los Angeles business attorneys can provide legal guidance on all types of business matters, including those involving fiduciary responsibilities. We offer free case evaluations and will fight to protect your rights. Contact us today for more information.