Is your West Palm Beach trustee investing your trust funds into companies that he or she owns? Are you worried about other self-dealing? Has your trustee been loaning himself money from the trust? You may want to learn about constructive trusts and your remedies under the law for self-dealing.
Self Dealing
- A trustee owes you, the beneficiary, a duty of loyalty, which includes not self-dealing.
- This includes any type of self-benefit afforded the trustee besides reasonable compensation for their time and efforts.
- You can (as beneficiary) waive your duty of loyalty to a certain extent, including with regard to self-dealing.
- Is your trustee benefitting from his appointment in other ways that may be improper?
- What happens to the benefit that the trustee collected?
- Have you ever heard of constructive trust?
Constructive Trust
- There is an old joke that whenever you see the word “constructive” around a word in law, it just means its not that thing. The joke goes a professor asks his students “what is a constructive cat? ” To which the student answers, “Whatever it is, it’s not a cat.”
- A constructive trust is not a trust.
- A court can rule after a trustee engages in self-dealing that a trustee is holding the benefit in constructive trust for the beneficiary (plaintiff).
- The trustee then pays all that benefit directly to the plaintiff, not into the trust.
Fabbio v. Narghizian
- In the March 26, 2015 case of Fabbio v. Narghizian the Second District Court of Appeal in California dealt with a joint venture gone wrong. The parties had similar duties of loyalty to one another that a trustee owes to a beneficiary.
- One partner began taking opportunities that the business was entitled to, and did not share those profits with the other partners.
- The court found that the self-dealing of one party was not permitted.
- The court ordered that all benefit derived from the self-dealing was held inconstructive trust and ordered it paid directly to the company.
Do you suspect your West Palm Beach trustee of self-dealing?
Want to learn more? Check out the entire case by clicking here.