Legal Advice for Trustees Facing Beneficiary Disputes

Responsibilities of a Beneficiary

First off, we need to understand where everybody stands. Beneficiaries make up the will, which is why it was created in the first place. However, they should know that a trustee is also a part of the will and, therefore, try to be in harmony with the trustee.

Apart from being the trust beneficiary, it is also possible to be a trustee. It is common with surviving spouses. Because they are directly linked, they automatically become the heir. Besides, it is common for one sibling to be the trustee and beneficiary of their parent’s trust.

Either way, the trustee position is always challenging. You can’t afford to be sloppy just because it’s family. There needs to be serious record-keeping, discipline, and decision-making. If need be, pretend you don’t know the beneficiaries and that they are not your siblings. It will help you perform your fiduciary trustee duties without bias.

Responsibilities of a Trustee

The trustee is tasked with critical tasks such as trust distribution to beneficiaries. While there are several duties of a trustee, the main ones can be summarized as follows:

• Probate the will – Probating the will involves liquidating, obtaining tax clearance, and selling assets. It is imperative to note that beneficiaries will always believe they have the power to control how the grantor’s properties are sold, and, therefore, you should be prepared for a point of contention.
• Pay beneficiaries and heirs – This goes without saying: a trustee needs to distribute funds to the beneficiaries as per the agreement on the will. Besides, they also need to pay creditors and handle other financial matters. Regardless, failing to distribute funds within the required time or favoring one beneficiary more than the other can lead to trust litigation.
• Protect the property of the grantor/testator – Both the beneficiary and the trustee’s main priority should be to protect the grantor’s property at all costs. The trustee should inventory all the properties, debts, and everything from the grantor.

Communication is critical in almost any field, and it can be one of the main factors that can cause disagreement between the trustee and the beneficiaries. Beneficiaries should understand that just because the trustee does not report the daily occurrence pitch-by-pitch, they are breaching the contract.

Trustee-Beneficiary Conflict of Interest

Conflicts are inevitable, especially when there are shared funds involved. A beneficiary and trustee conflict of interest mainly occurs when the trustee mixes financial accounts with personal interests. Typically, this does not benefit the beneficiary, which can make them make a bit of noise. So, how do you respond to such cases as the trustee? Counsel up!

You should seek counsel at the earliest time possible. Apart from that, your actions as a trustee of the trust should ensure a fair and equitable distribution of wealth. Here are some of the instances that can lead to trustee and beneficiary potential conflict:

• Trustees sell assets to related parties or themselves at a deflated or inflated price.
• Investing trust funds in the trustee’s business or a related party.
• Favoring one beneficiary more than the other in wealth distribution.
• Receiving undisclosed income or commission from the trust.
• Failing to communicate with beneficiaries when there are new developments within the trust.

If it is found that the trustee breached any of the above fiduciary duties, it is necessary to address the issues and try to solve them outside of court. This is because litigation can be costly and strain the trust further.

Professional Advice to Trustees

Get along with the beneficiaries.

Getting along with the beneficiaries is the most crucial element for trustees. A trustee’s job is typically made much easier when there is a good, friendly relationship with the beneficiaries. This can also lead to the question: can a trustee be a beneficiary? Yes, it is also possible for a beneficiary to be a trustee.

Even so, when you have been selected and tasked to be the trustee, you should note that you will need to handle both people and money. Your worry might be mainly about the finances, but the most important is people, and the lack of a good relationship can make your work as a trustee daunting.

Get in Touch With the Beneficiaries Early

The first step to building a good relationship with the beneficiaries should be to work on the formalities earlier. Call the families or visit them if they live nearby. Have a sit-down, get to know each other, and start the trust administration process.

You will need to provide an overview of the steps that will be followed before you can start providing them with the benefits or funds from the trust. In addition, you will also need to contact the family’s attorney to accompany you during your first meetings. They will help answer questions about your responsibilities in the trust.

Review the Trust Terms

After going through the formalities, you will need to read the terms of the trust to the beneficiaries. Some states will also require you to provide trust document copies. With the help of the family’s lawyer, you can choose to show the essential provisions that are more particular to a beneficiary.

Ensure you only give enough to safeguard everyone’s interests. However, in some cases, such as siblings entitled to a fair amount, providing each with a complete copy of the document can be advisable. Technically, one of the main reasons the trustee should not share the complete trust is when one person is allocated more than the other, maybe based on the relationship with the grantor or a history of funds mismanagement.

Communicate Often and Well with the Beneficiaries

You might be performing all your fiduciary rights as a trustee, but if those benefiting from the trust don’t know why and what you are doing, there will likely be a disagreement. Usually, most beneficiaries don’t know about the trust administration process and will be anxious. The least you can do is communicate with them often and provide more insight into the process.

Here are some of the things you can do to help with their concerns:

• Let them know about their role
• Maintain contact with the beneficiaries
• Avoid hiding assets or trust documents from them
• Provide a realistic estimate of how long administration of the trust will take
• Engage with them and assume their questions as an opportunity to communicate with them and not to annoy

Depending on your state, you might also be required to provide some form of progress report or notices to the beneficiaries almost daily.

Can a Trustee Override the Duty of Beneficiaries?

Yes, a trustee can override the beneficiaries of a trust. As a trustee, it is your fiduciary duty not to allow every request from the beneficiaries. This might bring up the question: what are the rights of a trustee? Well, one of their primary rights is to override the beneficiaries and act according to the rules and instructions in the document.

While acting in accordance with the beneficiary’s requests is necessary, your fiduciary duties can limit you in certain aspects. You might also need to work closely with the family lawyer to help you identify when the beneficiary’s request does not align with the best interests of the document.

Trustee Fee Disputes

Being a trustee is not without compensation, and individuals are entitled to a reasonable fee. The document specifies the fee or the state can define it. If neither specifies, the trustee can estimate the payment based on the hours they spend conducting fiduciary duties. In cases where the trustee is a lawyer or a skilled accountant, they can use their expertise to justify a higher fee.

If the trustee believes the payment is unreasonable or unfair, they can dispute the case in court. The court will request records and documentation of the time spent on the tasks and make a judgment on a reasonable fee.

Final Thoughts

Trustees, like beneficiaries, are crucial parties in a trust and deserve equal rights. Both parties must be in harmony for the sake of the trust. Ensure you consider all the above factors to help protect your position and duties as a trustee of a trust, and there is no doubt that you will experience exceptional results. Are you looking for help with legal matters? Contact us for the best services in town, and let us ensure your rights are protected.