Negligence or incompetence in trust management is one example of a breach of fiduciary duty when managing a trust in California. In order to be found guilty, someone must have been injured by the trustee’s negligence. While the trustee may face criminal charges if found guilty of negligence, they often agree to pay the money back into the trust. Usually, negligence occurs because someone does not carry out their trustee duties instead of actively doing something wrong. Generally, negligence can be broken down into three categories.
Negligence by a trustee occurs when the trustee’s lack of attention causes someone to receive injuries. For example, the trustee of a special needs trust failed to pay the person’s electricity bill on time, so the person with special needs lived a couple of days without power before the situation was corrected.
Gross negligence by a trustee is a deliberate action causing someone to get hurt. For example, if the money in the trust is supposed to be used to pay the property taxes on a home for a person with special needs, but the trustee fails to pay those taxes for multiple years, and the person ends up homeless, then gross negligence has occurred.
Negligent misrepresentation occurs when the trustee fails to exercise reasonable care or competence to obtain or communicate correct information. There is a fine line between negligent misrepresentation and fraud, but the trustee must know that what they say is wrong in the latter case.
Negligence by a trustee is usually a passive behavior caused by the trustee not paying enough attention to his trustee duties, but in some cases, it may be more serious.