Category Archives: Removing a Trustee

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Large black rock will fall on your hand if you try to get to the trust document. Declaratory judgment needed first.

If No Contest Clause, Use a Declaratory Judgment

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A No Contest Clause basically says “If anyone contests what I said in this document, they don’t get anything.” The problem with a No Contest Clause is that no one knows what a “contest” is. If the executor or trustee isn’t doing his or her job, and you file something with the court complaining about that, is that a “contest”? Well, it might be. Below is a short discussion on how to use a Petition for Declaratory Judgment to battle a No Contest Clause.

Allegations of trustee misconduct are too common from our experience. This even happens in the case of a celebrity, such as the allegations that Michael Crichton’s widow mishandled the trust. When should you use a Petition for Declaratory Judgment? Let’s say you’re dealing with Charlie Brown’s parents’ trust. It says that after Mr. and Mrs. Brown die, Charlie Brown’s younger sister, Sally, is to become the successor trustee. And let’s say that Sally is now the trustee. The trust contains a No Contest Clause. Sally is refusing to do certain things (like selling the house, providing an accounting, treating the beneficiaries equally). If Charlie goes to court and make all of these claims, and then asks that Sally be removed as trustee, Charlie could be violating the clause (because the trust named Sally to be trustee). However, Charlie could still do this and get away with it if he has “probable cause” to bring your petition. (And yes, “probable cause” is also a loosey goosey term.)

Confused yet? Read on and hopefully it will get clearer …

Charlie has two choices. First, he can roll the dice and hope he can prove his case. That’s not a good idea. Or, second, he can file a Petition for Declaratory Judgment.  Assuming you go the second route, you are not actually asking for the Court to remove Sally the trustee. You are simply asking the Court to determine whether Sally has breached her duties as trustee. Here the petition would say:

WHERFORE, Petitioner requests that the Court:

  1. Find that Sally Brown is unwilling to act as trustee of the Trust.
  2. Appoint Charlie Brown as successor trustee of the Trust only if the Court finds that Sally Brown is unwilling to serve as trustee.
  3. Order Sally Brown to deliver all accounts, books, and records of the Trust to Charlie Brown only if the Court finds that Sally Brown is unwilling to serve as trustee.
  4. Grant such other and further relief the Court deem just and appropriate under the circumstances.

A really conservative approach to a Declaratory Judgment action would be to do this in two completely separate stages. First, you would ask the court to rule that if you bring an action alleging the various misdeeds of the trustee, that you would not be violating the No Contest Clause. Only after you have the Court’s blessing with that first proceeding would you file a second petition requesting that the trustee be removed. That’s the way things are done in, for example, California.

The same principle applies in the context of a Will.

If a trustee or Personal Rep is not doing his/her job, and the relevant document has a No Contest Clause, you need to see a probate litigation attorney. Do not try to do this on your own! We’re here to help. Give us a call at 602-443-4888.


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Recovering from Trustee Misconduct

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Recovering from Trustee MisconductBeneficiaries of a trust depend greatly on the trustee to act in the best interest of the beneficiaries and the trust.

Unfortunately, trustees don’t always live up to the duty and responsibility of their position. Beyond creating headaches for family members and other beneficiaries, such misconduct can rob them of their inheritance.

In previous posts we covered the actions that can led to the removal of a trustee [link to post on what qualifies trustee for removal] and how to petition the court to remove the trustee and appoint a successor.

After those important steps, how do you go get back the stolen or misused money? It all depends on whether you are able to trace where the money was sent, if it was spent or if it still exists in some form. Let’s look at an example:

If a trustee used money from the trust to buy a new house, and if that house has not been sold or transferred to someone else, you can get a court order to freeze the property and eventually have it transferred back to the trust.

If the money is gone, there are three ways to recover funds:

  1. Surcharge. This applies if the trustee is also a beneficiary of the trust. In this situation, the former trustee’s inheritance from the estate can be reduced by the amount of any judgment the court passes against him or her. To have a surcharge ordered on a former trustee, you must file what’s known as a “Petition for Surcharge” with the probate court.
  2. Seize assets. If you’re able to trace the trustee’s spending to existing assets (cars, jewelry or other property), or if you’re able to show bank statements showing cash the trustee’s withdrawals from estate funds at ATM machines, the court can place a judgment against the trustee, making it more likely that you will get the money back. If the trustee has spent money on intangible purchases such as vacations, it will be much harder to get the money back.
  3. Personal refund. If the trustee has other personal assets (such as a house or bank accounts), the court can order the former trustee to turn over those assets to compensate for the value taken from the trust.

The process of getting the money returned can be lengthy. It can take from three to six months or more to settle a case recovering losses. The court process involves gathering evidence, and filing a petition with the probate court (this is all part of the steps necessary to remove a trustee).

After the court determines the amount of damages caused by the former trustee, the new trustee or other beneficiaries can then request the court to make further orders. To give an example, let’s say that a former trustee, Roger, owned a house, which used to be owned by the trust. After Roger has been removed from the position of trustee, the court can order that the house belong again to the trust. An attorney for the trust can then get a certified copy of the order and record the ownership of the property with the county recorder in the county where the property is located.

If you’re dealing with a trustee who is mishandling a trust, don’t wait to seek help. An experienced probate litigation attorney can walk you through the tricky and complicated petitioning process. It’s important to have someone knowledgeable on your side who knows the law and the court system.

Your attorney should work closely with you and the court to help you recover lost funds that are justly yours. The probate courts are there to help you and your family. Remember to act quickly and seek the assistance of an attorney. This will increase the likelihood that you will recover your inheritance.

Have any questions about recovering from trustee misconduct? Give us a call. We’d love to help.

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