What if You Violated an Irrevocable Trust?

by Wayne Thomas


Overview of Irrevocable Trust

An irrevocable trust is a trust that cannot be withdrawn by the creator, often referred to as a grantor or settlor. The creator effectively parts ways with the trust once the property, known as the corpus, has been transferred into the trust and the trust document has been executed. Once the trust is established, an appointed trustee oversees the administration of the trust and is in charge of disbursing the funds to the beneficiaries according to the terms of the trust.

Duties of the Trustee

A trustee duly appointed to oversee an irrevocable trust must follow the express direction provided by the creator as specified in the trust document. In addition, the trustee has an independent duty to the beneficiaries to manage the trust responsibly and act with their best interests in mind. This includes maintaining trust property and refraining from commingling the assets with his personal assets. It also requires the trustee to avoid risky investments that could frustrate the purpose of the trust. In addition, the trustee must provide an accounting to the beneficiaries of all transactions affecting the trust.


If a trustee fails in his fiduciary duties or violates a term of the trust, he is considered in breach. For example, assume the trust instrument specified that the trustee was to make prudent investments with the trust property to ensure that sufficient funds existed to pay for the beneficiaries' college education. If the trustee instead secretly invests the trust assets in his own struggling business resulting in a huge loss and insufficient funds to cover the education expenses, this action could result in multiple breaches. First, the trustee engaged in self-dealing by placing his interests above that of the beneficiaries. Second, the trustee violated the terms of the trust and his fiduciary duty by knowingly and intentionally failing to make prudent investments, as well as failing to disclose his actions to the beneficiaries.


If a trustee breaches his fiducuary responsibilities or the terms of the trust, the beneficiaries have the right to petition the court to remove the trustee and appoint a replacement trustee. The process for removal and the remedies available to the beneficiaries are outlined in state law, and can vary. For example, in Florida, the beneficiaries may recover against the trustee for lost funds by denying compensation and requiring the trustee to personally contribute money or transfer his own property into the trust.