Whether a beneficiary can recover the value of lost opportunities that could have been realized had a trustee made distributions to that beneficiary was at issue in Williamson v. Brooks (January 31, 2017) ____ Cal. App. 5th ____ [____ Cal. Rptr. 3d ____].
Father created an irrevocable trust for the benefit of his daughter Beverly and his other adult children. In 2010, Beverly lost her employment at Father’s company, and she was unable to continue to make the mortgage payments on her home. At that time, the home was worth less than the outstanding mortgage against it. Beverly decided to quitclaim her interest in the home to her sister, declined her sister’s offer lease back the home for only $1,000 a month (versus her $2,800 a month house payment), and moved elsewhere. Her sister ultimately sold the home in 2012 for less than the mortgage balance.
The trustees in place at the time Beverly quitclaimed her interest in the home later resigned. The successor trustee sued them, contending that they breached their duty to keep Beverly informed about all the details of her interest in the trust and that, had she been aware of all her rights, she would have withdrawn money from the trust to save her interest in the home. In affirming the trial court’s decision for the former trustees, the Court of Appeal held that “trustees accused of breaches of fiduciary duty may only be held liable for losses to the trust itself, not for personal damages to beneficiaries. . . . ‘Thus, the trustee is only liable for loss or depreciation resulting from the breach of trust, for profits that the trustee made through the breach of trust, or for any profits that would have accrued to the trust but for the breach of trust.’” Even if they had breached any fiduciary duty, the trustees were not liable for what Beverly could have done with her potential trust distributions.
Although the Court of Appeal stated it was not necessary to its decision, it also found that the trustees had not breached their fiduciary duty to Beverly. They were accused of not keeping her fully informed of every detail of her rights under the trust. But the trial court found that: (1) Her father had made her aware that there was a trust in which she had an interest; and (2) when Beverly asked the trustees for more information, it was provided. The Court of Appeal affirmed that any absence of information was the result of Beverly’s lack of due diligence in asking about the details of a trust in which she had been informed of her interest.