Who (apart from the beneficiary) has standing to sue when a trustee violates the terms of the trust?

Question

The jurisdiction here is California, USA.

This is a (sort of) hypothetical - I heard (third hand) of someone with a trust like this. I'm not terribly confident that I have all the details correct, but I'm interested in the details as written in this question.

The idea is this: a wealthy parent created testamentary trusts for his/her three children. The children are all adults - youngest in his/her early thirties. The idea is that upon the parent's death, the children will inherit assets held in the trust until the child is 75. Each child is the trustee of his/her own trust. I don't know the specific terms of the trust, but I believe that they include provisions restricting the sale of some real estate.

The question is this: as the trustee of his/her own trust, what's to stop one of the children from violating the terms of the trust and selling the real estate held in the trust? As beneficiary, they would clearly have standing to sue to protect their interests, but since they're also the trustee, that doesn't make much sense.

Is there anyone besides the beneficiary who would have standing to sue to enforce the terms of the trust?

In the absence of anyone with standing to sue, is there any other mechanism by which the terms could be enforced?

Answer 1

Many trusts have a quasi-fiduciary called a "trust protector" who is empowered to enforce the terms of a trust who is designated in the trust document, and if a trust protector is named, that person can enforce the trust. Sometimes the power to enforce in that way is not expressly called a "trust protector" even though a person has a trust protector's powers (e.g. often the parents of a minor beneficiary have that power).

The state attorney general is generally vested with the authority to enforce trusts with a charitable beneficiary, sometimes this power is shared with the district attorney, but I don't know if that is the case in California.

If there are vested remainder or contingent beneficiaries of the trust, who become beneficiaries if there are assets of the trust remaining when he beneficiary dies or disclaims an interest in the trust, the remainder or contingent beneficiaries can usually enforce the trust.

The way that a trust with a deceased settlor/trustor (i.e. person who creates a trust) is usually enforced in the case of a trust with the same beneficiary and trustee is that the rights which the trust would otherwise create vis-a-vis third parties like creditors, divorcing spouses, and tax officials are not honored if the trust has been disregarded.

For example, assets in a trust created for your benefit by a third-party are often not treated as owned by you for purposes of estate taxation. But, if the trustee-beneficiary of that trust has not honored its terms, the trust assets would be treated as if they were owned personally by the trustee-beneficiary, potentially increasing the estate tax obligation of that person's estate at their death.

Similarly, normally a creditor of a trust beneficiary can't access trust assets in a trust created by a third-party. But, if the trustee-beneficiary has disregarded the trust terms, the creditor would be allowed to access the trust assets as if they were owned outright by the debtor trustee-beneficiary.