For decades, serving as a trustee was viewed as a largely administrative role—honoring the grantor’s wishes, managing assets prudently, and distributing funds as directed. Today, that assumption no longer holds. Trustee lawsuits are increasing, and many of them are filed even when trustees act in good faith.
The rise in litigation isn’t driven by widespread misconduct. Instead, it reflects how modern trusts, families, and expectations have fundamentally changed. Therefore, trustees should consider themselves forewarned.
1. Modern Families Are More Complex—and More Conflicted
Blended families, second marriages, stepchildren, and unequal or removing inheritances are now common features of estate planning. These structures often embed tension directly into the trust relationship. These tensions are real and will cause significant disturbance in family dynamics.
While a trust document may clearly outline distribution standards, beneficiaries often interpret “fairness” through a personal or emotional lens rather than a legal one. Trustees can find themselves accused of favoritism or bias simply for following discretionary authority as written.
Practical response:
- Use precise trust language that limits ambiguity
- Consider co-trustees or independent trustees where family dynamics are strained
- Maintain trustee liability insurance to cover defense costs when disputes escalate
2. Beneficiaries Are More Informed—and More Willing to Sue
Access to legal information has never been easier. Beneficiaries now routinely research fiduciary duties online, consult forums, and engage attorneys early—sometimes on a contingency basis.
As a result, lawsuits are filed more readily, including claims that are speculative or ultimately unsuccessful. Importantly, even meritless claims can be expensive to defend.
Practical response:
- Proactive communication and transparency
- Regular written reports and disclosures
- Insurance coverage that pays for legal defense, not just damages
3. Market Volatility Fuels Hindsight-Based Claims
Economic downturns frequently trigger trustee litigation. When portfolios decline, beneficiaries may allege that trustees were too aggressive, too conservative, or simply made poor timing decisions.
Courts, however, evaluate trustee conduct based on process—not outcomes. Unfortunately, beneficiaries often pursue claims based on losses alone.
Practical response:
- Establish and follow a written Investment Policy Statement (IPS)
- Document investment decisions and advisor input
- Maintain insurance protection against investment-related allegations
4. Trust Assets Are More Complex Than Ever
Today’s trusts often hold assets that require specialized knowledge: family businesses, private equity, multi-state real estate, intellectual property, or digital assets.
Even prudent delegation can expose trustees to claims if beneficiaries believe the trustee failed to properly oversee or understand these holdings.
Practical response:
- Conduct early asset reviews
- Delegate to qualified professionals with clear documentation
- Ensure insurance policies cover administrative and oversight errors
5. Emotional Expectations Clash With Legal Reality
Many beneficiaries expect trustees—especially family members—to act as mediators, financial supporters, or emotional caregivers. When trustees enforce legal boundaries, disappointment can quickly turn into resentment and litigation.
Practical response:
- Set expectations early about the trustee’s role
- Separate personal relationships from fiduciary duties
- Use insurance as a backstop when disputes become personal
Conclusion
The rise in trustee lawsuits reflects broader social and financial complexity—not a decline in trustee integrity. Trustees who recognize these pressures and prepare accordingly are far better positioned to serve effectively while protecting themselves from unnecessary personal risk.