As the name implies, a trustee is a person “entrusted” to work in the best interests of the trust and its beneficiaries, as well as the person who created the trust, if they are still alive. They are also considered fiduciaries. Essentially, this means they must always act in a way that shuns any self-dealing, or avoids doing something that puts their own interests above that of the beneficiaries, or the settlor of the trust.
Despite the fact that the word “trust” is literally imbedded in their very name, not all trustees follow the rules. That’s when angry folks come to see us at Trust Law Partners.
Before we get too critical, it should be said that being a trustee carries a lot of responsibility. At a minimum they must:
- Fully understand the terms of the trust and who are its beneficiaries
- Ensure the trust’s assets are safe
- Distribute assets to beneficiaries according to the trust agreement
- Make any discretionary decisions according to the provisions of the trust, which could include who gets what—and when
- Prepare records, statements and tax returns as required by law
- Issue statements of accounts and tax reports regarding the trust
- Answer any questions beneficiaries may have
Perhaps because of these responsibilities—plus the fact it can be a thankless job that can make one an object of scorn, people aren’t exactly standing in line to get the job. Nor is everyone cut out to be a trustee. For this reason, many people seek the services of professional independent trustees, or corporate entities, such as a bank.
Not to justify their actions, but for various reasons trustees sometimes do the wrong thing, especially non-professional ones like a family member. Often it’s not intentional. But sometimes it really is. When a trustee acts in a way that is in conflict with his or her responsibilities it’s called a breach of fiduciary duty. That’s a fancy term to describe a whole range of selfish actions that can deny sons, daughters, nieces and nephews their rightful inheritance.
At Trust Law Partners, we’ve seen it all. Trustees will use trust funds to purchase personal gifts. They’ll overpay themselves for handling trust affairs. Or, giddy with the millions of dollars suddenly at their disposal, they’ll go on a buying spree to benefit friends or other family members.
Other trustee shenanigans are equally bad, though not quite as obvious. These include things like selling real estate (the family house, rentals or commercial properties) below market value to friends or business associates, and possibly getting kick-backs in the bargain. Then there are seemingly innocent violations such as combining trust money with personal funds in one account. While that might not seem harmful at first, it is not allowed due to the possibility of using trust funds for personal expenses, either accidentally or intentionally.
Finally, trustees can also lose the beneficiaries’ trust simply through inaction. They’ll be slow in administering the estate, or hang onto properties and cash, which delay could devalue the assets due to adverse market conditions. In these cases, Trust Law Partners can take action to compel distribution, which is the subject of one of our earlier blogs.
In the majority of cases, trustees do their best to execute the provisions of a trust, handle a multitude of responsibilities, and keep all the beneficiaries happy—often under very emotional circumstances. However, if you feel the trustee of the trust you’re part of is not keeping your best interests in mind you may have legal recourse to address these complaints.
Trust Law Partners is always ready to assess your case and help you explore your options—with no upfront fees.