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Trustee Not Paying Beneficiaries
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Probate Litigation Attorney

Trustee Not Paying Beneficiaries

In practicality, a beneficiary may get no funds from a trustee if the trust authorizes the trustees not to. The ability of a trustee to decline to pay beneficiaries is determined by how the trust form is drafted. Upon the transference of assets, a trustee should legally follow the conditions set in the trust. Most trusts allow trustees a lot of leeway in deciding to make payouts and the amounts to release.

Probate Attorney

Trustee Not Paying Beneficiaries and What to Do!

In just about all circumstances, a trustee with this degree of responsibility can choose not to fund the beneficiaries if they consider the request unjustified. Additionally, certain trusts limit whether or not a trustee can make payments. This is generally when the beneficiary meets specific requirements or reaches a particular age. If the beneficiaries request a payout, a trustee shall decline. However, a beneficiary may be legally protected if the trustee’s decision to withhold payment is not permitted or authorized under the trust’s guidelines.

The beneficiaries may have to sue the trustees for violation of fiduciary responsibility, request the judge to direct the trustees to execute the sought payment, or dismiss the trustees. As a beneficiary, you should also be aware that the trust may lack adequate assets to fulfill a required distribution. So, to clear any doubts, getting a financial statement from the trustee will be essential. Yet, trust accounting is part of communication that a trustee should not keep to themselves. That brings us to the next important point, does a trustee have to communicate? But before we head to that:

What are your rights as a beneficiary of a trust?

Your rights as a beneficiary may be dictated by the instruction laid within the trust. Yet, the will may vest more power within the trustees, which may, in turn, step over your rights. All in all, you need to understand the common rights of a beneficiary to make sure the trustee is not stepping on any toes.

Be informed about the trust

You are entitled to basic details, including the date of trust establishment, its location, the trustees of the trust, and their physical addresses. If any modifications are made, you also have the right to be kept within the loop. Most importantly, when the grantor passes away, it is your right to be informed about the passing and how you may obtain the trust funds.

Receive updates from the trustee over the management of assets

As a trust beneficiary, you have the right to be updated on how the trustee manages the trust. It is your right to defend the assets left to you by the grantor. Doing so will help you ascertain whether the trustees’ actions are following the trust’s stipulated procedures.

The right to oust a trustee

If you are being exploited or a trustee is neglecting your rights, you have the right to a probate lawyer. They will ascertain if you have a strong case and then help you request the court to dismiss the trustee.

Accounting Rights

Beneficiaries are entitled to an accounting. So, they need to be informed about the assets held by the trust, accumulated interest, and payments made from the trust. Again, this might be obtained from the trustees with the assistance of a lawyer.

Does a trustee have to communicate? What are their information duties?

Trustees should be constantly mindful of their responsibilities to avoid abusing their authority. As stipulated under section 16060 of the California Trust Laws, a trustee should keep the beneficiary reasonably apprised of the trusts and their execution.

Notify the beneficiaries about the trust

After the grantor’s passing, the trustee is required by section 16061.7 to inform the trust’s beneficiary and any lawful heirs (even estranged ones) about the passing. Typically, the trustee will draft the letter under a lawyer’s guidance and send it out within 60 days.

Typically, the letter comprises:

1. The name and contact details for the trustees;

2. Details on the acquisition of a full copy of the trust agreement;

3. An estimated timeline for the procedure;

4. Details on the statute of limitations and contests;

5. Updating the beneficiaries.

When managing the trust, you should keep beneficiaries within the loop and apprise them of every undertaking. Although it is not essential to keep them up to date on everything, you may have to provide updates on critical changes to win their trust. Regular communication, as in every relationship, correlates to trust.

When you’re conducting a real estate transaction, for instance, contacting them via email after an offer is submitted is essential to queue them in on the progress. If there are delays in emptying a specific account, a brief update might assist in keeping heirs calm as well. Also, communication and transparency will make you aware of which assets they want to keep before actually selling or discarding them when listing a personal property.

Provide the beneficiaries with trust accounting

Trustees are also required under the Probate Law to avail trust accounting to the beneficiaries. Accountings are, however, to be accompanied by a report explaining all the activities within the accounting. Also, trust revenue and profits sources, trust costs, and any fund dividends and trustees’ remuneration received throughout this period should all be included in the accounting.

Dealing with an out-of-touch trustee? Here is what you should do

First, you should be adequately informed on how to proceed when your trustee becomes unreliable. In this scenario, it would be advisable to consult with a trust lawsuit lawyer to advise you on the necessary steps to take. Usually, in California, the trustee has a 60-day window following the settlor’s death to provide trust copies.

So, you may have to wait until this period elapses before you can seek legal counsel. Even so, you may stay ahead of the game by notifying the trustee through email or writing that you are aware of the 2-month deadline but would prefer to receive the copies earlier.

When should a beneficiary sue a trustee for failure to communicate or distribute funds?

If the trustee misconducts themselves, mismanages the assets, fails to make payments, or fails to communicate, you should hire a probate attorney to assist you in suing the trustee. Remember, as a beneficiary, you have the right to resort to a legal battle to preserve your live trust beneficiary entitlements and protect the assets irrespective of whether the trustees’ acts were deliberate or inadvertent. You may have a case based on three criteria: negligence, trust theft, or trustee misconduct, which encompasses tax fraud.

Trustee negligence

The negligence charge may only be possible when the court decides that the trustees have failed to execute their fiduciary duties by not giving it attention and care or lacking the ability to do so. Unlike more malevolent and self-serving activities, such as theft or forgery, fiduciary negligence frequently occurs when the trustees are unaware of their responsibilities or become too busy or preoccupied to perform their tasks in time.

Even so, negligence is not a guarantee that the beneficiaries were unharmed. Indeed, no laws may be broken, but you can request the court to dismiss the trustee.

Trustee fraud

Trustee fraud still falls under trustee misconduct, in which the trustee performs a deliberate unlawful act to enrich themselves at the expense of the trust’s beneficiary or other entities. A typical form of trustee fraud is the “sham trust.”

In this case, the trust was solely established to suit the objectives of the trust’s grantor without the purpose of transferring ownership of assets or properties. Although the trust may validate such actions, if the motivation behind its creation was dishonest or to serve the trustee, the case will fall under trustee fraud.

Trust theft

Also, the trustee’s dubious accountings should be questioned. But, the trustee may be unwilling to divulge trust details. Your best bet is that the trustee is trying to cover up unauthorized transactions or theft. Or, perhaps the trustees are derailing the distribution process.

In every one of these instances, the trustees’ acts represent a conduct violation. Therefore, using the trustees under an estate lawyer’s guidance is justified and advised. To put it bluntly, a violation of fiduciary responsibility happens if the delegated entity fails to serve in accordance with the trust’s wishes.

Wrapping up

State laws may vary, but in California, the probate section 16060 has it that beneficiaries should be constantly informed about the trust dealings. Also, your right as a beneficiary is to receive trust funds from your trustee. Remember, the trustee is there to oversee that the grantor’s wishes are executed.

Plus, it might have been in the grantor’s best interests that you don’t get any trust funds until you have met certain conditions. But, if this is not included in the trust, and worse, if the trustee fails to communicate, you should consider it a breach of their fiduciary obligation. Besides, it would be best to get advice from a probate attorney as early as possible so you may prevent further damages to your trust.

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Trustee Not Paying Beneficiaries - What To Consider!

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Hess-Verdon & Associates, PLC
620 Newport Center Drive Suite 1400
Newport Beach, California, 92660
Office: (949) 706-7300 
Toll Free: (888) 318-4430

Copyright © 2022 Hess-Verdon, PLC. All rights reserved. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. The verdicts and settlements listed on this site are intended to be representative of cases handled by Hess-Verdon & Associates, PLC. These listings are not a guarantee or prediction of the outcome of any other claims. The information contained on this website is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.

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Hess-Verdon & Associates, PLC
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Toll Free: (888) 318-4430

Copyright © 2022 Hess-Verdon, PLC. All rights reserved. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. The verdicts and settlements listed on this site are intended to be representative of cases handled by Hess-Verdon & Associates, PLC. These listings are not a guarantee or prediction of the outcome of any other claims. The information contained on this website is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.

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