Serving as a trustee can place you in charge of assets that someone else set aside for family members or other beneficiaries. In that role, you are responsible for carrying out the instructions in the trust and handling those assets appropriately.
If problems arise and your actions cause financial harm, questions may follow about whether you handled that role as required. In some cases, personal liability may become part of the dispute. Whether that happens can depend on the trust terms, your conduct and the losses involved.
Your duties as a trustee
As a trustee, you may have authority over trust assets, but that authority comes with legal duties. Those duties may include:
- Following the trust terms
- Managing assets with reasonable care
- Keeping accurate records
- Making distributions as allowed
- Avoiding conflicts of interest
- Protecting trust property from unnecessary loss
A drop in asset value or a beneficiary’s disagreement does not automatically make you personally liable. Liability may become an issue if your actions go beyond your authority or if you fail to carry out your duties in a way that causes financial harm.
Actions that may raise liability concerns
Certain trustee actions may raise questions about whether you handled the trust according to your duties. In some situations, disputes arise because beneficiaries believe trust assets were mishandled, decisions went beyond your authority or avoidable losses occurred. Examples of conduct that may raise those concerns include:
- Using trust property for personal benefit
- Making distributions that do not follow the trust terms
- Failing to keep records or share required information
- Mixing trust funds with personal funds
- Acting despite a conflict of interest
- Mismanaging trust assets in a way that causes financial loss
- Keeping profits tied to improper conduct
These situations do not automatically mean you will face personal liability. A court may still look at what happened, whether your conduct violated your duties and whether that conduct caused measurable financial harm.
What personal liability can mean
Not every trustee mistake leads to personal liability. A poor outcome does not automatically mean you failed in your role.
But if a court finds that your actions went beyond your authority or caused financial harm because you failed to carry out your duties, you may face legal consequences. Depending on the dispute, that may include repayment of losses, return of improperly used property or removal from your role as trustee.