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What happens if a trustee does not follow the trust?
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What happens if a trustee does not follow the trust? 

Essentially, trustees have a fiduciary responsibility to the beneficiaries. In some cases, there’s a trust instrument governing how assets are to be distributed. In other cases, the trustee is allowed the discretion to control and manage the asset as their experience dictates as long as it’s for the good of beneficiaries. But even so, they must record their transactions and keep the beneficiaries informed. Otherwise, they may be sued for breach of fiduciary duty.

Following the Trust – Trustee Obligations

What’s a breach of fiduciary duty? 

Breach of fiduciary duty is when a trustee is found to be acting in bad faith. A trust is an outright gift to the beneficiary and should be distributed as the grantor wishes. As a trustee, you will be in breach of fiduciary duty if: 

  • Self-dealing, e.g., selling a trust property to yourself
  • Denying beneficiaries their share of the assets
  • Using assets for their own benefits
  • Selling assets in trust yet the trust agreement forbids

What happens if you are found to be misappropriating a trust? 

If you are misappropriating a trust, four things can happen, depending on the beneficiaries and their attorneys. Here’s a look: 

You may be asked to present a written account of the trust funds and distribution.

The trust administration process is usually the first step taken by the beneficiaries and their lawyers before filing a court case if all fail. The trust accounting must describe assets you received from the grantor and the amount distributed to beneficiaries so far. It must also list all assets being held in the trust. The information will help the other party get a clear picture of the trust finances and how much you owe the beneficiaries.

Court case to compel the release of trust accounting and distribute assets

The beneficiary and their attorney will ask you to distribute the money you owe the beneficiaries. But if you refuse to produce the accounting information or distribute assets, their next step is filing a petition in probate court. Usually, the judge will compel you to release the information, so have it ready. The other party will review the information and determine their next step. They may also subpoena your bank records to verify the information presented.

Legal action for breach of fiduciary duty

If the trust accounting and bank record show misappropriation of the assets in the trust, you may be sued for breach of fiduciary duties. The other reason this may happen is if you fail to communicate or fulfill the beneficiaries’ requests. At this point, the beneficiary might ask the court to: 

  • Remove you from the trustee position
  • Replace you
  • Terminate the trust
  • Compel you to distribute the assets in trust properly.

Removal or suspension is never easy. The beneficiary’s team will have to present evidence; after discovery, a trial can continue. During the trial, the beneficiary’s attorney will try to have the court place the trust under a temporary fiduciary.  

As a trustee being sued, you can ask the trust to take care of your legal expenses. The court might allow it, but if you are later found in the wrong, you will have to pay the money back, plus others found to have misappropriated. Court cases take time and money. Most legal teams will seek to have the court compel you to fulfill your fiduciary duties instead of being removed. 

Can I get used even if the trust has a no-contest clause? 

Yes, you can get sued if you are found to be misappropriating a trust, even in the case of a no-contest clause. A no-contest clause only keeps beneficiaries from challenging the trust’s validity, but it won’t stop them from suing you should you breach your fiduciary duties.

Need help with trust litigation? 

A lot can happen when it comes to trust management and administration. Some cases are a serious breach of fiduciary duties; others are not.

For example, you may be sued for failing to distribute assets when you are still settling taxes, paying debts, and preparing the estate for sale after the grantor’s death. Usually, there’s a reasonable time frame to make distributions.  

Still, some beneficiaries may not understand, and you may find yourself in court. In any case, you need someone experienced with trust litigations. For legal help when it comes to beneficiaries-trustees conflicts, give us a call. We are qualified trust attorneys in California with plenty of experience representing beneficiaries and trustees. Give us a call to find out how we may help.

Why Choose Hess-Verdon & Associates, PLC

Hess-Verdon is in Newport Beach. We have 30 years’ experience in estate planning law. We have helped many clients protect their estate, grow their estate, and pass it down to their loved ones through various legal instruments.

Our estate lawyers can help you administer or contest a trust or will. We also have expertise in business law and elder abuse law. Expect personalized services that put you in control. Contact us today at 949-706-7300

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What Happens If A Trustee Does Not Follow The Trust?

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With over thirty years of experience in successfully handling all types of trust and estate cases, we can rightfully say that we are the best trust litigation attorneys in Orange County. Here at Hess-Verdon &Associates, we are known for our aggressive legal representation, which has helped us obtain our clients’ best outcomes. Our experienced and knowledgeable staff works hard to enforce the rights of a trustee. Let us make your job a bit easier.

Contact us today to discuss your trust litigation case. 

Are you looking for a trust attorney in the Newport Beach area? When it comes to the practice of Trust and estates, it can be difficult finding an attorney that’s experienced in What Happens If A Trustee Does Not Follow The Trust? handling your specific issues.

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