Not everyone works out. And you have the right, as a beneficiary of a trust, to petition to remove the trustee of the estate if he or she proves to be incompetent, hostile, dishonest or otherwise unable to fulfill the responsibilities of administering the trust.
Here’s a quick definition of a trustee and a summary of the duties of the position.
A trustee can be a person (or a trust company) who has legal title to property, who holds that property for the benefit of another and who has assumed a legal duty (also called a fiduciary duty) to act in the best interests of the beneficiaries of the trust. As you can imagine, things can go awry.
Here’s an all too-frequent scenario from a recent case:
In a case involving a prominent Phoenix family that operated multiple businesses owned by their trust, the father had passed away a number of years earlier. The mother continued running the businesses, gradually turning over control to her adult children. One of the sons took control of the trust after the mother developed dementia.
The son used the money from the trust to enhance properties he would ultimately inherit. He also bought himself a new car and started taking lavish cruises and vacations.
My clients – the siblings of this trustee – turned to me for help. First they obtained evidence of wrongdoing. In this case, they were able to get copies of checks written from the trust directly to the trustee. This gave us enough to petition the court and get the son removed as trustee and replaced with a private fiduciary.
Trusts can be set up to allow for safeguards in case of wrongdoing. That is, they contain trigger points that can lead to the removal of a trustee.
For trusts that don’t specify a mechanism to remove a trustee, the court recognizes other reasons. Here are three:
- If the trustee has committed a breach of the fiduciary duties of care over the assets or loyalty to the beneficiaries. Examples include failing to pay taxes, stealing assets, and not following the specifications of the trust.
- If the trustee is unfit, unwilling or persistently fails to act in the best interest of the beneficiaries and the trust, the court can remove the trustee.
- In come cases, the circumstances surrounding the trust can change significantly or all qualified beneficiaries can request the removal of the trustee. The court can review the case and remove the trustee if it deems this for the best interest of the beneficiaries, as long as this isn’t inconsistent with the original specifications and intent of the trust.
If you are the beneficiary of a trust, it’s important to know what to do if the assets are being mismanaged. Trusts are normally very private affairs. In addition, trusts, being civil matters, are outside the jurisdiction of the police. There’s typically no court supervision and no government regulation to make sure that the trust is being run properly. It’s up to you and your attorney to pay attention to how a trust is being managed.
You need to take immediate action if you believe money is being misused. Proactive action increases your ability to protect your inheritance. Contact an experienced probate attorney at the first indication that a trustee is unethical or irresponsible with trust assets.