The single most common concern I hear from people who are skeptical of trusts is this: “What’s to stop the trustee from doing whatever they want with my assets?”
It is a fair question. And the answer is: the law. Specifically, the law of fiduciary duty — which is among the most demanding legal standards that exists.
What “Fiduciary” Actually Means
A fiduciary is someone who is legally required to act in the best interest of another person. The fiduciary relationship is one of the highest duties recognized by law — higher than a typical contractual obligation, and enforced by courts with serious consequences for violation.
When someone agrees to serve as your trustee — whether that person is a family member, a professional trustee, or a trust company — they take on fiduciary status the moment they accept that role.
The Four Core Trustee Duties
1. Duty of Loyalty
The trustee must act solely in the interest of the trust’s beneficiaries. Not their own interest. Not the interest of other family members. Not their financial advisor’s interest. The beneficiaries’ interest — exclusively.
Self-dealing — using trust assets for the trustee’s own benefit — is one of the most serious breaches a trustee can commit, and it carries significant personal liability.
2. Duty of Prudent Administration
The trustee must manage trust assets the way a careful, reasonable person would manage their own property. This includes investing prudently, diversifying assets appropriately (unless the trust document specifies otherwise), and avoiding unnecessary risk.
The standard is not perfection — it is the judgment of a reasonable, informed person. But a trustee who gambles with assets, ignores the portfolio, or makes decisions without proper consideration can be held personally liable for resulting losses.
3. Duty to Account
The trustee must keep accurate records of all trust transactions and report to beneficiaries on a regular basis. This is not optional. Beneficiaries have a legal right to information about the trust’s assets and administration.
A trustee who refuses to provide accountings, keeps sloppy records, or hides transactions from beneficiaries is in breach of their duty — and any beneficiary can take legal action to compel transparency or seek removal of the trustee.
4. Duty to Follow the Trust
The trust document is a legally binding contract. The trustee must follow its written instructions — regarding distributions, investment strategy, beneficiary rights, and anything else specified in the document. Deviating from those instructions without court authorization is a breach of duty.
What Happens If a Trustee Breaches Their Duties
Any beneficiary has the legal right to file a court action against a trustee who violates their fiduciary duties. Remedies include:
- Removal of the trustee and appointment of a successor
- Personal liability for losses caused by the breach
- Recovery of profits the trustee wrongfully gained
- Surcharge — a court order requiring the trustee to compensate the trust for harm caused
Yes — this involves court. But the critical distinction is this: with a trust, court involvement only happens if something actually goes wrong. With a will, court involvement — probate — is guaranteed, automatic, and unavoidable, regardless of whether anything is wrong at all.
The Bottom Line
A trustee is not free to do whatever they want. They are one of the most legally constrained roles that exists. The concern that a trust gives a trustee unchecked power is one of the most common misconceptions in estate planning — and one of the most important to correct.
For a full breakdown of this and six other common myths, see: 7 Common Myths About Wills vs. Trusts.
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About the Author Chuck Roulet is an estate planning and elder law attorney with nearly 30 years of experience, licensed in both Minnesota and Florida. He is the founding attorney of Roulet Law Firm, P.A., with offices in Minnetonka, MN and Venice, FL. He has been featured in USA Today and other national media, and is the author of The Florida Snowbird Guide. |
Legal Disclaimer: This page is for general informational purposes only and does not constitute legal advice. Laws vary by state and individual circumstances differ. Please consult a licensed attorney in your state for advice specific to your situation. Roulet Law Firm, P.A. is licensed to practice law in Minnesota and Florida.
