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Pitfalls of Estate Planning: When Assets Are Used for Personal Benefit

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When Assets Are Used for Personal BenefitA trustee must never use the assets of a trust for personal benefit (unless this is specifically permitted by the trust). There’s really no wiggle room here. Trustees are held to the highest legal standards.

If you’re serving as a trustee, conservator or guardian, it’s important to clearly understand the duties of your position to be certain that you are performing your duties correctly and to protect yourself and reduce your liability in case of error.

Most cases where assets are mismanaged involve trusts. This is because trusts are normally unsupervised. As a result, it’s not uncommon for a trustee to neglect providing beneficiaries with annual accountings or to keep detailed bookkeeping records. Laws vary by states, but in Arizona, current law requires that a trustee give annual accountings and provide beneficiaries sufficient information to protect their interests.

Some trustees, unfortunately, take the breach of duty further and use an estate’s funds for their personal use. Taking family vacations, buying cars or paying off a personal mortgage are all examples where a trustee has breached fiduciary duty by misusing trust assets.

Here are the three biggest mistakes trustees make when managing trust assets:

  1. Failing to keep records.
  2. Taking unauthorized personal “loans” from the trust.
  3. Using assets for personal use – and thinking they won’t get caught.

A trustee who mismanages trust assets—whether intentional or unintentional—can face severe legal consequences. But you should know that if you’re serving as a trustee and don’t understand your responsibilities and duties, you don’t have to do it alone. An attorney with experience in trust management can help you avoid making costly mistakes and ensure that you’re aware of your responsibilities.

From the other side, if you’re a beneficiary and you suspect the trustee is mismanaging assets, don’t wait to take action. Seek legal counsel from a skilled probate attorney.

Settling an estate is a complex process. Probate court offers resources and recourse for those who are working to settle a loved one’s estate. We’d love to help make this process easier for you and your family. Give us a call with any questions about how you can properly manage a trust, and what you can do when trust assets are being mismanaged.

In the next post, we’ll look at how to deal with estate conflict in probate disputes.

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