Trusts and Estates

Ca. Trs. & Estates Quarterly 2015, Volume 21, Issue 1


By Matthew P. Matiasevich, Esq.*


Trustees who face the threat of surcharge tend to overlook the court’s authority to excuse liability for breach of trust. Some practitioners neglect this aspect of the law or struggle to apply it when the opportunity arises, neither of which is surprising given the lack of case law on the subject. But while this concept might seem obscure, the principle of equitable excuse protects various fiduciaries and has been codified for trustees, personal representatives, conservators of an estate, and attorneys-in-fact.1 The case of Kleveland v. Siegel & Wolensky, LLP,2 illustrates this principle at work, and a review of the salient authorities will help demonstrate the opportunities-and limitations-that counsel should keep in mind when arguing that the court should equitably excuse a trustee from the liability that would otherwise result from a breach of trust.

While the case law is sparse, the principle of equitable excuse has been codified with respect to trustees in Probate Code section 16440, subdivision (b), which allows a court to excuse liability for breach of trust if the statutory prerequisites are met. As a threshold matter, the trustee must have acted reasonably and in good faith under the circumstances known to the trustee, and if that is the case, the court can excuse the trustee from liability, either in whole or in part, if it would be equitable to do so. But while interpreting this statute is a relatively straightforward endeavor, applying it can be difficult. The court’s use of section 16440, subdivision (b), can involve an unusual mix of fact-finding and discretion, and as a practical matter, the attorney might have to consider various matters when litigating the issue of equitable excuse.

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