Tag Archives: successor trustee

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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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How to Petition to Remove a Trustee

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How to Petition to Remove a TrusteeLGIn a previous post, we covered the things trustees do that can lead to their being removed from that position. After you’ve identified where a trustee has abused this position of trust, and as you seek to have the offending trustee removed, the next step is to petition the court for that removal, and to appoint a successor.

It’s important that you work with an experienced probate litigation attorney on the petition process. This area of law is complex (even for lawyers). If you are unfamiliar with probate litigation, you risk increased delays and costs if things aren’t filed or presented correctly.

A trustee can be removed either by the terms of the trust or by court order. If you need to remove a trustee, the first thing is to contact a probate and trust litigation attorney who can help you put together a plan for removing the trustee.

If the trustee can’t be removed under the terms of the trust, then this will have to be done by going to court. The petition to the court should include specific details explaining why the trustee should be removed. If possible, include evidence to support your case (usually documentation such as copies of checks made out to the trustee or other evidence of the misuse of the trust’s funds or assets).

Your attorney will review the case to determine if your situation qualifies as an emergency (this can speed up the process in cases where the trustee is spending money or otherwise reducing the value of the trust).

Here’s an example of one such emergency case:

One family had a large amount of gold bullion owned by the trust. The bullion was kept in a safe in the home of the family member who was managing the trust.  Other family members noticed that the trustee had bought several new cars and expensive jewelry for his wife. The family suspected the trustee of using the bullion to fund these extravagant personal purchases.

After reviewing the case and gathering evidence that showed exactly those things, I helped the family petition for emergency status to remove the trustee. We were able to get an immediate court order freezing the assets and requiring that the remaining gold bullion be transferred to a secure storage facility.

Although you need to gather evidence of wrongdoing once you notice something wrong, the funds may not be returned. It is extremely difficult to recover money once it’s been spent. Waiting and hoping things work out rarely works out well. It’s better to take immediate action if you think a trustee is acting improperly.

Don’t be afraid to consult an attorney. Look for one who will work to protect the value of the trust while exploring ways to resolve disputes.

If you have any questions about removing a trustee or need help protecting your inheritance from an ineffective trustee, comment below or contact our office.

We’d love to help.

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How to Remove a Trustee

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How to Remove a TrusteeNot 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:

  1. 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.
  2. 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.
  3. 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.

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