Breach of Trust
Upon the death of the settlor of a revocable trust, the trust becomes irrevocable. The trustee’s duties, and the liabilities for breaching these duties, are set forth in the Ohio Trust Code. The trustee has a duty to administer the trust in good faith and administer the trust in accordance with the terms and purposes of the trust as a prudent person, exercising reasonable care, skill, and caution. The trustee must also administer the trust in the best interests of the beneficiaries. The trustee must notify beneficiaries of the trust of the death of the settlor, that the trust has become irrevocable, and that they have accepted the position of trustee of the irrevocable trust. The trustee must also advise the beneficiaries of their right to request a copy of the trust, and the right to a trustee’s report. The trustee must keep the beneficiaries of the trust reasonably informed about the administration of the trust and the material facts necessary for them to protect their interest. To accomplish this, the trustee must promptly respond to a beneficiary’s request for information related to the administration of the trust and is also required to provide beneficiaries with an annual report of trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets, and, if feasible, the trust assets and respective market values. The trustee must also keep trust property separate from their own property. Any transaction involving the management of trust property entered into by the trustee for their own personal account or that is otherwise affected by a conflict between the trustee’s fiduciary and personal interests may be voidable by a beneficiary affected by the transaction.
A beneficiary of the trust may bring a claim against the trustee for breaching their fiduciary duties as trustee. A breach of trust claim must be brought within two years of receiving a report from the trustee which (1) discloses the existence of a potential claim for breach of trust and (2) informs the recipient of the time allowed for commencing a proceeding. If the trustee does not provide the beneficiary with such a disclosure, the claim must be brought within four years after the first of the following events: (1) The removal, resignation or death of the trustee; (2) The termination of the beneficiary’s interest in the trust; (3) The termination of the trust; (4) The time at which the beneficiary knew or should have known of the breach of trust.
A trustee who breaches their fiduciary duty is liable to the beneficiaries affected for the amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred or the profit the trustee made by reason of the breach, whichever is greater. The Court also has authority to award the beneficiary’s attorney’s fees and costs in pursuing their claim against the trustee. To remedy a breach of the trustee’s duties, a court may also take any of the following actions: (1) compel the trustee to perform his duties; (2) enjoin the trustee from committing a breach of trust; (3) compel the trustee to redress a breach of trust by paying money, restoring property, or other means; (4) order a trustee to provide an accounting; (5) appoint a special fiduciary to take possession of the trust property and administer the trust; (6) suspend the trustee; (7) remove the trustee (requires clear and convincing proof of a breach of duty); (8) reduce or deny compensation to the trustee; (9) void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; (10) Order any other appropriate relief.
FOR INFORMATION: To schedule an appointment regarding a possible breach of trust, contact Phillip J. Henry, Esq. 440-243-2800. There are no legal fees for discussing a matter until the scope of the needed legal services has been discussed and established.