- A breach of trust happens when a trustee fails to carry out their duties properly — whether by acting outside the powers the trust document gives them, failing to act when they should…
- - Self-dealing — using trust property, or a trust opportunity, for the trustee's own personal benefit rather than the beneficiaries'.
- A trustee is a fiduciary, meaning they must act in the best interests of the trust and its beneficiaries, avoid conflicts of interest, keep proper records, and manage trust property with…
A trustee holds real power over property that legally belongs to someone else's benefit. That power comes with correspondingly strict legal obligations — and when a trustee fails to meet them, the law calls it a breach of trust. Understanding what actually counts as a breach, and what beneficiaries can do about it, matters whether you are a beneficiary worried about how a trust is being run, or a trustee trying to stay well inside the lines.
What Counts as a Breach of Trust
A breach of trust happens when a trustee fails to carry out their duties properly — whether by acting outside the powers the trust document gives them, failing to act when they should have, or acting in a way that puts their own interests ahead of the beneficiaries'. It does not require dishonesty; a trustee can breach their duties through carelessness or a genuine misunderstanding of their obligations, not just through deliberate wrongdoing.
Common Examples of Breach of Trust
- Self-dealing — using trust property, or a trust opportunity, for the trustee's own personal benefit rather than the beneficiaries'.
- Failing to invest prudently — mismanaging trust investments, taking on inappropriate risk, or leaving funds sitting in a way that fails to serve the trust's purpose.
- Mixing trust property with personal property — not keeping trust funds and assets clearly separate from the trustee's own.
- Favouring one beneficiary over another without a proper basis in the trust document, where the trustee is supposed to treat beneficiaries impartially.
- Distributing trust property incorrectly — paying out to the wrong person, in the wrong amount, or before debts and taxes that should have been addressed first.
- Failing to account — refusing or neglecting to provide beneficiaries with a proper record of what has happened to the trust property.
What a Trustee Owes Beneficiaries in the First Place
Before breach comes duty. A trustee is a fiduciary, meaning they must act in the best interests of the trust and its beneficiaries, avoid conflicts of interest, keep proper records, and manage trust property with the care a prudent person would apply to their own affairs — but held to a higher standard because the property is not actually theirs. A breach of trust is, at bottom, a failure of one or more of these underlying obligations.
Remedies Available to Beneficiaries
| Remedy | What it does |
|---|---|
| Accounting | Requires the trustee to produce a full, itemized record of what happened to the trust property, so a breach can actually be identified |
| Equitable compensation | Requires the trustee to personally make good any loss the breach caused to the trust |
| Tracing | Allows beneficiaries to follow misapplied trust property, or what it was exchanged for, and recover it, even after it has changed form |
| Removal of the trustee | A court can remove a trustee who has breached their duties and appoint a replacement |
| Costs consequences | A trustee found to have breached their duties can be ordered to personally bear some or all of the legal costs of the dispute, rather than the trust paying them |
Personal Liability: Why a Breach Can Follow a Trustee Personally
One of the most important things for a trustee to understand is that a breach of trust is not simply absorbed by the trust itself — a trustee found to have breached their duties can be made personally liable to restore the loss, out of their own assets if necessary. This is part of why trustees are expected to get professional advice on decisions they are unsure about, rather than guessing and hoping it works out.
Time Limits for Bringing a Claim
In Ontario, most civil claims — including many claims against a trustee — are subject to a basic two-year limitation period, though exactly when that period starts running depends on when the problem was, or reasonably should have been, discovered. Limitation timing in this area is genuinely fact-specific, so a beneficiary who suspects a breach of trust should speak to a lawyer promptly rather than assume there is ample time to act.
Frequently asked questions
Does a beneficiary need proof of dishonesty to claim a breach of trust?
No. A breach of trust can arise from carelessness, poor judgment, or a misunderstanding of the trustee's obligations — dishonest intent is not a requirement, though it can affect how seriously a breach is treated.
Can a trustee be forgiven for a breach if beneficiaries consent afterward?
Sometimes, if every affected beneficiary is an adult, is fully informed of what happened, and voluntarily agrees to release the trustee from liability for it. This does not work where a minor, unborn, or incapable beneficiary is affected, since they cannot give that consent themselves.
What should a beneficiary do if they suspect a breach of trust?
Start by requesting a proper accounting from the trustee, and speak to a lawyer promptly given the limitation period concerns described above. Acting early preserves options that can narrow or disappear with time.
Can co-trustees be held responsible for one trustee's breach?
Potentially, especially if a co-trustee knew about the breach and did nothing, or failed to exercise proper oversight over a fellow trustee's conduct. This is one of the reasons trustees are expected to actively participate in decisions rather than simply defer to a co-trustee.
This is a wills & estates question
Start a file online — flat, published fees, reviewed by a licensed Ontario lawyer before a dollar is owed.