Category Archives: Trust Administration

  • 0

Recovering from Trustee Misconduct

Tags : 

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.

Listen to the Podcast


  • 0

Administering a Trust with an Ongoing Business

Tags : 

Administering a Trust with an Ongoing BusinessAdministering a trust with an ongoing business can be intimidating and overwhelming. It is even more tricky if the business needs to go through probate. And for good reason.

As a trustee or personal representative, you will be held to a high standard as you administer the trust, a standard higher than that the original owner was held to. And if you have specific knowledge (such as having owned a business before, being an attorney or CPA) you will be held to a higher standard still.

Here are three steps you can take as a trustee or personal representative that will help you better manage your responsibility as well as reduce your liability as you administer an estate or trust that has business or complex investments:

  1. Assemble a team. Even if you have experience with owning and operating a business or in managing an investment portfolio, you can be held accountable for making decisions that have a negative impact on the viability of the trust’s business or assets. Seek help from qualified professionals (CPA, probate attorney with experience working with businesses and other relevant advisors.)
  2. Delegate control. You need to find a qualified person to take responsibility or accountability for his or her actions in managing this business and operating it. That person must be committed to making the right decisions, even difficult ones such as firing family members. (This in particular is a common and difficult decision that must be made with a number of trusts.)
  3. Maintain communication. As personal representative or trustee, it’s your responsibility to keep beneficiaries informed of the state of the business or other assets.

Passing along the commitments and responsibilities of a business and business assets through a trust can be complicated. The trustee or personal representative who administers the estate should understand the responsibilities of the position.

Without information, knowledge and expertise needed to run a business profitably, the trustee can be held liable for a decline in the business. Assembling a team and delegating control are two critical steps a trustee should make to maintain and manage the assets. Be sure to keep the beneficiaries informed and in the loop regarding the state of affairs.

If you need help understanding the duties of a trustee and how to manage a business or other complex assets in a trust, we’d love to help.

Listen to the Podcast


  • 0

Estate Planning: What Are the Duties of a Trustee?

Tags : 

Estate Planning What Are the Duties of a TrusteeMost people feel honored when asked to be a trustee over a friend or loved one’s estate. But being a trustee is more than a title. It comes with a lot of responsibility and obligation.

The general duties of a trustee vary depending on the laws of the state where the trust is situated. But to provide you with an overview, here are the duties of a trustee based on Arizona statutes, where I practice:

1. Duty to administer. The first duty of a trustee is to administer the trust in good faith and, according to its terms and purposes, in the interest of the beneficiaries, according to Arizona statutes,. This involves reviewing the trust document or trust instrument to determine how the trust is to be administered, how debts are to be paid, etc.

2. Duty of loyalty. The trustee has the duty to administer the trust solely in the interest of beneficiaries. This means the trustee should not use the trust as a source of funds for personal activities or investments (thus, no gambling or buying speculative businesses). All expenditures should be solely in the interest of the beneficiaries.

3. Duty of impartiality. If the trust has two or more beneficiaries, the trustee must act impartially when investing, managing and distributing trust property, giving due regard to the beneficiaries’ respective interests

4. Duty of prudent administration. The trustee should administer the trust in a reasonable and prudent manner. This means not making haphazard or random choices when choosing investments, managing business or managing assets.

5. Cost of administration. The trustee may only incur costs that are
reasonable in relation to the trust property. For example, it may be
reasonable to hire an attorney and spend $50,000 to fight a lawsuit if it’s for a multimillion-dollar trust. Obviously, that would not be prudent for a
$60,000 trust.

6. Duty to use special skills. If a trustee has special skills or expertise, it’s the trustee’s duty to use them to benefit of the trust. If you’re a CPA or an attorney, you’re expected to use your skills and training for the trust.

7. Delegation. As a trustee, you must delegate duties, and exercise reasonable care, skill and caution when it comes to selecting an agent. You must also establish the scope and terms of that delegation and periodically review the agent’s actions and performance.

8. Duty to control and protect trust property. It’s important to make sure assets aren’t stolen and to guard against the waste of assets.

9. Duty to keep records and identification of trust property. This is both a protection for a trust and for the trustee. Keeping good records will make it simpler when preparing taxes.

10. Duty to collect trust property. The trustee must identify the trust property so things don’t get lost and stolen.

11. Duty to inform and report. The trustee is responsible for keeping the qualified beneficiaries of the trust reasonably informed and responding to requests from beneficiaries regarding the trust.

12. Discretionary powers and tax savings. These powers provide the trustee with options in order to accommodate varying situations.

As you can see, this is a big job. But that doesn’t mean you have to do it alone. You have the right (and duty) to seek expert help to make sure things are handled properly. If you have any questions about your duties as a trustee, I’d love to help. Leave your question below or contact our office.

Listen to the Podcast


  • 0

Appearing Pro Per: Why You Shouldn’t Represent Yourself (even if you’re a lawyer)

Tags : 

There is a trend for people to represent themselves more and more in legal matters. This is called appearing “in propria persona” or “pro per.” But unless it is an extremely simple legal matter (such as a speeding ticket or small claims court dispute), you are always going to be better served by having an experienced legal advocate on your side. Here are the top 4 reasons why you shouldn’t represent yourself (even if you’re a lawyer) in probate court.
Reason #1: Even if there is no dispute now, there could be if you do something wrong. If you are the person in charge, such as the personal representative or trustee, then you are held to a very high standard. You have a fiduciary duty to act in the best interest of the estate, to act fairly, and to administer the estate or trust expeditiously. But the applicable probate statutes, plus case law, are complicated even for lawyers who practice exclusively in this area. And if you make a wrong move (such as distributing money to the wrong people), you can be held personally liable. Is it really worth saving a few thousand dollars to risk this much personal liability?
Reason #2: You don’t know the applicable law and rules of procedure. Unless you are an experienced probate and estate planning attorney, you are at a severe disadvantage. You are expected to know all of the applicable probate statutes, plus the probate rules, plus the civil rules (to the extent that they do not conflict with the probate rules). Then there are the softer issues, such as knowing when the hearsay rule or the Dead Man’s Statute apply. (Hint: Even if you can recite these rules by heart, that has very little to do with their application in real life during a real evidentiary hearing.)
Reason #3: You are taken more seriously by the opposing parties (and the court) if you have a lawyer. In grade school, did you ever have an older sibling, or a friend, who could help you stand up to a bully or show you the ropes of how to deal with social situations? I had an older sister who would give me straight-forward advice about how to handle various social situations. Or have you ever gone to a party in which you didn’t know anyone? That is a lot easier with a “buddy” as well. Having a lawyer is somewhat like this. You don’t need to always worry that you might forget something or do something wrong, because your lawyer has your back and is helping you navigate the system.
Reason #4: You can’t see outside your own bottle. We all imagine that we are the stars of our own movies. Yet we don’t know how others perceive us. Are we being taken seriously? Do our legal arguments make sense to other people? Is our line of thinking persuasive? There is a saying among attorneys that “An attorney who chooses to represent himself in court has a fool for a client.” Even lawyers who routinely handle legal matters know better than to handle their own cases. The reason is this: We (as lawyers) would be too emotionally involved in our own situation to be able to make rational decisions. This hurts us when it comes to making sound, logical decisions. It also hinders our ability to see the big picture, possible flaws in our thinking, and possible solutions.
If this applies to lawyers who routinely handle legal matters, then it applies even more to non-lawyers. There is definitely an advantage to hiring an experienced advocate to handle your legal drama for you. It will get done quicker and have a higher likelihood of success.

Contact Form

Fields marked with an * are required