If you are the beneficiary of a trust, it means that although you do not physically have possession of the assets held in the trust, you do have an ownership interest in the assets. It is the Trustee’s responsibility to distribute those assets to you according to the terms of the trust. What options do you have though if the Trustee fails to distribute the trust assets? How do you know if, and when, suing a Trustee of a trust is the best option?
Why Might a Trust Be Used to Distribute Assets?
For many people, the idea of gifting assets outright to loved ones doesn’t sit well for a variety of reasons. If the beneficiary is a minor child, the law won’t allow direct gifts. Even if the beneficiary is legally an adult, if he/she is still relatively young, gifting a large lump sum of money is usually not a wise idea. Neither is handing over a lump sum of money, or valuable assets, to someone with a history of addiction or who is known to be spendthrift. When gifting outright is not a viable option for any reason, a common solution is to create a trust to hold the assets and distribute them in smaller amounts over a longer period of time. A trust is a legal relationship wherein property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor, Trustor, or Maker, who transfers property to a Trustee who is appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries. A trust can have a single beneficiary or numerous beneficiaries as well as have both current and future beneficiaries.
Trustee Duties and Responsibilities
The Trustee of a trust can be a single person, more than one person, or an entity (such as a bank). All too often Settlors make the mistake of appointing someone close to them as the Trustee despite that fact that the individual has no experience administering a trust. The complex nature of trust administration typically makes appointing a professional a better choice. The Trustee is responsible for protecting, managing and investing the trust assets in addition to administering the trust according to the trust terms. Some of the specific duties and responsibilities a Trustee has include:
- Abiding by the trust terms unless they are impossible, illegal, or unconscionable
- Investing trust funds using the “Prudent Investor Standard”
- Monitoring trust investments
- Communicating with trust beneficiaries
- Resolving conflicts among beneficiaries
- Making discretionary decisions
- Distributing trust funds to beneficiaries
- Approving or denying distributions if given discretionary authority
- Keeping detailed trust records
- Preparing and paying trust taxes
Suing a Trustee of a Trust
If you are a beneficiary of a trust and you have reason to question the way in which the Trustee is administering the trust you have every right to pursue your concerns. For example, if you believe that any of the following are occurring, you should consult with an experienced trust attorney right away:
- The Trustee is unresponsive despite attempts to contact him/her.
- You have not received scheduled distributions within a reasonable time frame.
- You believe the Trustee is engaging in self-dealing.
- You perceive a conflict of interest on the part of the Trustee.
- The Trustee has failed or refused to abide by a term of the trust.
- You believe the trust purpose is not being furthered.
- The Trustee refuses to provide you with records regarding trust business.
This is not an exhaustive list; however, it gives you an idea of reasons why legal action might be necessary. Suing a Trustee of a trust is an extreme measure and is usually only done when more conservative efforts to bring the Trustee into compliance have failed. If it does become necessary to pursue legal action against the Trustee, the Trustee could be held personally liable for debts of the trust or for damages to a third party and/or to the beneficiaries of the trust.
Contact a Sacramento Trust Attorney
Please download our FREE estate planning checklist. If you are not whether or not you need a probate attorney, contact us at the Northern California Center for Estate Planning & Elder Law to find out today by calling (916)-437-3500 or by filling out our online contact form.