Can a Trustee Be Held Personally Liable in Washington?

Your sister has run your late mother's trust for three years, the account is smaller than it should be, and her only explanation is that the trust "took a loss." Or you just agreed to serve as trustee and are starting to wonder what you signed up for. Either way the question is the same: when trust money is lost, whose money makes it right?

Yes, a trustee can be personally liable, and Washington's statute is blunt about it. Under RCW 11.98.085, a trustee who commits a breach of trust is liable for the greater of two numbers: the amount needed to restore the trust property and distributions to what they would have been without the breach, or the profit the trustee made from the breach. That debt belongs to the trustee, not to the trust. A careful, honest trustee has real protections, though.

What Counts as a Breach of Trust?

A breach is a failure to do what the trust document or Washington law requires of the trustee. The core duties sit in a handful of statutes. RCW 11.98.078 requires a trustee to administer the trust solely in the interests of the beneficiaries, and to act impartially when there is more than one. RCW 11.100.020 requires a trustee to invest and manage trust assets as a prudent investor would, using reasonable care, skill, and caution. RCW 11.98.072 requires a trustee to keep qualified beneficiaries reasonably informed about the administration of the trust, and RCW 11.106.020 requires an itemized statement of receipts and disbursements at least once a year to each beneficiary who is currently eligible to receive distributions.

Self-dealing gets the harshest treatment. Under RCW 11.98.078, a transaction involving trust property that the trustee enters into for the trustee's own account can be voided by an affected beneficiary, with narrow exceptions like authorization in the trust itself or court approval. A deal with the trustee's spouse, parents, siblings, or descendants is presumed to be affected by a conflict, and it is the trustee who has to show the beneficiaries were not hurt.

Notice what is missing from that list: a bad result. RCW 11.100.020 says investment decisions are judged in the context of the whole portfolio and the overall strategy, not one asset in isolation. A prudent, documented decision that loses money in a down market is not a breach.

How Much Can a Trustee Owe?

Because RCW 11.98.085 uses the greater of the loss or the gain, the math runs against the trustee who breached. A trustee who makes a careless loan of $40,000 in trust money that is never repaid owes the trust what it would have had if the money had stayed put. A trustee who quietly profits from a side deal owes that profit even if the trust lost nothing.

The exposure does not stop there. The court has discretion under RCW 11.96A.150 to award costs and reasonable attorney fees against any party or out of the trust. A beneficiary can also ask the court to replace the trustee, which is the subject of how to remove a trustee in Washington.

Co-trustees do not get to hide behind each other. RCW 11.98.016 says nothing in it excuses a co-trustee from liability for failing to attempt to prevent a breach of trust. "I let my brother handle everything" is not a defense.

Liability to Outsiders: Contracts and Accidents

Beneficiaries are not the only people who can come after a trustee. RCW 11.98.110 covers contracts and injury claims that arise during administration.

On contracts, a trustee may be held personally liable on a contract the trustee makes unless personal liability is excluded. The statute gives the simple fix: adding the words "trustee" or "as trustee" after the signature excludes personal liability. A trustee who hires a roofer for the trust's rental house and signs with a bare name has taken a risk that one extra word would have avoided.

For tort claims arising during administration, RCW 11.98.110 allows collection from trust property when the court finds that the tort was a common incident of the business activity properly conducted for the trust, or that neither the trustee, a predecessor, nor their officers or employees was personally at fault. A separate rule permits collection to the extent the tort increased the value of trust property. The trustee may be personally liable only to the extent damages are not collectible from trust property under those rules.

What Protects a Careful Trustee?

Washington law gives a diligent trustee several shields. Under RCW 11.98.100, when an event like a marriage, divorce, or death affects the trust, a trustee who used reasonable care to find out about it is not liable for acting without knowledge of it. Under RCW 11.98.071, a trustee who prudently selects, instructs, and monitors an agent is not liable for the agent's actions, as explained in whether a trustee can delegate duties in Washington. Under RCW 11.98.108, a trustee is not liable to a beneficiary who consented to the conduct, released the trustee, or ratified the transaction, unless the trustee obtained that consent improperly or the beneficiary did not know the material facts or their rights.

The trust document itself can also narrow a trustee's exposure, within limits. That topic has its own article: can a trust protect a trustee from being sued.

How Long Does a Beneficiary Have to Sue?

The deadline in RCW 11.96A.070 rewards trustees who report. A beneficiary may not start a proceeding for breach of trust more than three years after the trustee delivered, in the manner required by RCW 11.96A.110, a report that adequately disclosed the potential claim and told the beneficiary how much time there was to act. If no report like that was ever delivered, the three years run from the first of these events: the trustee's removal, resignation, or death, the end of the beneficiary's interest in the trust, or the end of the trust.

A Worked Example

Dana is trustee of her late father's trust, which benefits Dana and her two half-brothers from his first marriage. She sells the trust's rental house in Everett to her husband for well under its appraised value and never sends an annual statement. Under RCW 11.98.078, the sale to her spouse is presumed to be tainted by a conflict, so her half-brothers can ask a court to void it unless Dana proves it did not harm them. Under RCW 11.98.085, she owes the trust whatever it takes to put it where it would have been. And because she delivered no report, the three-year clock that a proper report would have started never began to run.

Change the facts. Dana lists the house on the open market, sells at the appraised price, and sends her brothers a full report. Even if prices rise the next year, she made a defensible decision, disclosed it, and started the clock.

Whether You Are the Trustee or the Beneficiary

Trustee liability often grows out of informality: unlabeled signatures, missing reports, and family deals nobody wrote down. If you are serving as trustee and want to do the job right, or you are a beneficiary who suspects it is being done wrong, the Law Office of Chad Foster can review the trust and the record with you. Call 425.785.8679 to talk with a Snohomish County estate planning and probate attorney.