How Remedies for Breach Are Measured
Trust administration carries real responsibility. A trustee has a fiduciary duty to act in the best interests of the beneficiaries. When a trustee crosses the line through mismanagement, conflict of interest, or neglect, the law puts a dollar figure on the damage.
The court can order a trustee to make it right. That typically means restoring property to its original value or paying money back into the trust. In serious cases, a judge may also remove the trustee from the role entirely.
A trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of either: 1. The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred. 2. The profit the trustee made by reason of the breach.
A.R.S. § 14-11002(A)This is a straightforward formula. The court looks at two numbers: how much the trust lost and how much the trustee gained. Whichever is larger is what the trustee owes. As noted in the act in section 14-7404, a trustee who commits a breach faces these liability rules directly.
When Multiple Trustees Share the Blame
If a trust has co-trustees and more than one is responsible for a breach, the law allows contribution between them. Each trustee can seek reimbursement from the others for their share of the liability.
A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries.
A.R.S. § 14-11002(B)There is an important exception. A trustee who acted in bad faith or showed reckless indifference cannot shift liability to others. A trustee who personally benefited from the breach cannot claim contribution for that benefit. The law puts the heaviest burden on the worst actor.