Breach of Trust

A breach of trust takes place whenever a trustee fails to fulf‌il his or
her obligations with respect to t he administration of the tr ust or fails
to dispose properly of the tr ust property. The breach may be a failure to
meet the obligations created by the term s of the trust instr ument, the
rules of equity, or statute. A breach can be an act either of commission
or omission; that is, it may be that the trustee commits an act contrary
to his or her duties, or it may be a failure to car ry out a duty.
Liability for breach of trust arises whether the breach is i nnocent,
negligent, or fraudulent, and exists even if t he loss would have occurred
without the breach. In general, liabilit y is imposed not to punish trus tees
but to restore the benef‌iciaries to the position they would have been in
had the breach not occurred. The exception to thi s general proposition
arises in the situation where the trustee make s a prof‌it by virtue of the
breach. In that case, t he trustee must disgorge the prof‌it to the benef‌ici-
aries even if they would not otherw ise have been entitled to it.
EXAMPLE: X and Y are co-t rustees. X is a lawyer, Y is not. X makes the
decisions and Y acquiesces. The decisions lack the requi site prudence, and
the trust suffers a loss. Throughout, Y acted as he did in t he belief it was in
the best interests of the trust a nd the benef‌iciaries. Is Y liable as well as X?
Yes, both X and Y are liable. Intention is irrelevant, except to a deter-
mination of fraud or dishonesty, which is not in issue in th is example.
The standard to which tru stees are held is an objective one, not a sub-
jective one, so the fact that Y acted in what he thought was a prudent

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