Numerous legal issues arise when discussing, drafting, or funding a trust. Determining the duties of both the trustee and the beneficiary is vital to better understanding these legally intricate details inherent in wills and trusts.
The trustee is appointed as a fiduciary to fulfill all the requirements and mandates of a trust. Suppose a trustee does not abide by the exact legal trust instructions or court-mandated legal obligations. In that case, litigation can be used to suspend, remove, replace, and recover damages from the trustee.
So, the short and simple answer is yes. Commonly, this legal course is taken when the trustee has breached, mishandled their fiduciary duties, committed misconduct, or harmed the trust. The trust’s beneficiaries may bring a legal claim against a trustee so long as they have a substantial, provable, and valid reason.
What Is the “Standard of Care” That a Trustee Must Adhere To?
A trustee must always exhibit a specific “Standard of Care” when managing the trust. They must administer a trust with reasonable care, skill, and caution that any prudent person would exercise to accomplish the trust’s outlined goals. If the trustees have specific skills, such as investing, they must use those skills in administering their trustee duties.
California law dictates that a trustee is subject to the “Uniform Prudent Investor Act,” which holds them to a standard that dictates that they must manage and invest trust assets as a prudent investor. In doing so, a trustee must always consider the trust’s purpose and terms.
Although utilizing the “Uniform Prudent Investor Act,” each particular investment is not commonly scrutinized; instead, the entire trust portfolio is evaluated. Also, unless the terms of the trust state otherwise, the trustee has the fiduciary duty to invest trust property, preserve it, and make it productive.
Depending on the size and scope of the estate assets, trusts can be highly complicated and have many legal parameters (like those described above) that the trustee must uphold.
For example, If the breach of duty of loyalty resulted in a loss to the trust, as in a family trust embezzlement situation, the trustee could be penalized to make good the loss by paying for it out of their pocket. If the trustee profits from their breach, then the trustee is considered a constructive trustee and must turn over those profits to the actual beneficiary of the trust.
Due to the nature of the trust and the assets it may control, it is never advisable to manage its drafting and the myriad of legal details on your own. Consulting with an experienced Fresno family law firm is usually the only way a trust can be drafted to meet the grantor’s accurate and precise wishes. If drawn up correctly and clearly, the trustee will have less chance to mishandle the assets and avoid the long, stressful, and costly need for a lawsuit.
What Can Happen If the Trustee Does Not Follow Rules Of the Trust?
If you are a beneficiary or heir, you can sue a trustee of a trust if you feel any or all of your rights to information have been compromised. When a loved one (or Grantor) dies and leaves with a Trust in place, the trustee is designated to manage the exact wishes of the Trustor. The trustee oversees numerous responsibilities, such as obtaining death certificates, understanding all assets, and managing them correctly, so pilferage does not occur.
So, the most critical step is to make sure you have a case against the trustee, and you and your estate lawyer can prove a breach of their fiduciary duty.
There are various reasons why a beneficiary will sue a trustee. One of the main reasons to petition to remove a trustee is a lack of transparency or incompetent or dishonest estate asset management.
Initially, to sue a Trustee, you must prove the trustee breached their fiduciary duty. The fiduciary duty includes numerous items, and some that can initiate a suit are:
- A trustee refuses to give a full or proper accounting to the beneficiaries.
- The trustee mishandled estate funds.
- The trustee does not communicate properly or refuses to fulfill a beneficiary request for information.
- The trustee is self-dealing and putting their interest before that of the beneficiary.
Your experienced and knowledgeable estate planning lawyer will understand what to look for and how to handle any situation that may require investigation and lawsuit.
If I Am the Beneficiary of the Trust, What Are Some Of My Rights?
As a beneficiary, you will be communicating exclusively with the appointed trustee. So, you must familiarize yourself with how the trustee can breach their duties and the “red flags” which may appear. If a breach is even suspected, you must take the necessary steps to enforce the trust and protect your rights.
Remember that you always have the right to petition the court to have the trustee removed. Still, there are times when other trust beneficiary rights can be used before resorting to more extreme measures, such as removal.
Some of your fundamental rights as the beneficiary include:
- A right to a copy of any of the trust documents.
- A right to be kept completely informed about the trust and its administration.
- The right to a complete and transparent accounting regarding the trust.
- A right to challenge an accounting if you deem it necessary.
- The right to be treated impartially by the trustee.
- The right to receive timely distributions from the trust as dictated.
- The right to petition the court to have the trustee suspended and surcharged if necessary.
If you are the trust beneficiary, you must keep in mind that the trustee is always to function as a fiduciary. This means that it is always the trustee’s job to consider and act in the trust beneficiaries’ best interests.
I Feel I May Have to Sue My Trustee; How Should I Proceed?
Drafting, managing, and handling all the various details of most trusts is a complex and detailed job. You should never proceed without the guidance of a skilled professional Fresno estate planning law firm.
This becomes even more mandatory if you, as the trust beneficiary, even suspect the trustee may have committed a breach of their fiduciary duty. It becomes mandatory that you seek counsel from your estate planning lawyer as soon as possible. This act will not only enforce the rights you possess as a beneficiary but also prevent the trustee from causing any more harm to your trust.