Trustee Refuses to Give an Accounting

Does a Trustee have to give an accounting to beneficiaries?

Trustee Refuses to Give Accounting

If the Trustee is the settlor, they can refuse to provide an accounting as the Trust instrument is revocable. Once the settlor dies, the Trust Instrument become irrevocable and the Successor Trustee must comply to probate code 16060 and keep beneficiary’s reasonably informed of the Trust and its administration or will be in breach of their fiduciary duty.

Probate Topics, Probate Litigation 

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What Powers Does a Trustee Have

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What Powers Does a Trustee Have

Trustee Powers

People often ask, “What Powers does a Trustee have”? First, the powers of the Trustee comes from a basis of living up to their fiduciary duty meaning, to stay transparent in all dealings and reasonable updates to the beneficiaries and heirs through annual reporting. The Trustee must follow the instructions in the Trust document. Therefore, the Trustee has both duties and powers and much responsibility! Trustee education is the key!

What Powers Does a Trustee Have

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 Trustee Powers

With that said, the powers come from the state legislation for estate planning. A core tenet for estate planning is to transfer assets in anticipation of death to your loved ones and to preserve the maximum amount of wealth possible using estate planning vehicles like revocable and irrevocable trusts.

When a Trustor/Grantor dies, the powers of the Trustee are set in motion. A revocable trust becomes irrevocable, and the trustee powers are to live up to the Trustor’s wishes and stay compliant to state laws.

What Power Does a Trustee Have Over a Trust

  1. Buying and selling of Assets
  2. Determining distributions to the beneficiaries under the trust instrument
  3. Hiring and firing advisors
  4. Making income distributions
  5. Power to lease
  6. Power to Administer the Trust
  7. Duty to defend the Trust
  8. Duty to Report
  9. Trust Termination

With that said, the duties of a Trustee are expansive yet overseen by the beneficiaries via transparency. It is important to note that the assets in the Trust are not the Trustees. The Trustee is safeguarding the assets for others, therefore no commingling of funds and using the Trust as a piggy bank. 

Does a Trustee have the power to ask for professional assistance?

The Trustee has the right to search out professional accountants, attorneys, appraisers, etc., to help complete the distribution of assets to the beneficiaries promptly. Note: There are time-tables associated with the time allotted for keeping a Trust open. The Trustee and Beneficiaries must know and stay reasonable in their expectations.  

What Powers does the Trustee Not Have?

As a Trustee, you have duties and powers to protect the assets of the estate. Now, just because a Trustee has powers to sell an asset, for example, does not give them the right to sell below market value to a friend, for example. The estate is not the assets of the Trustee, and should any breach of fiduciary duty take place, the beneficiaries can petition the courts to remove the Trustee.

Lastly, a Trustee can be a beneficiary, and there may be more than one Trustee (Trustee and Co-Trustee). The Trustee is held responsible for the misappropriation of Trust funds, including stealing/embezzlement. Therefore the powers of the Trustee are for the benefit of the estate, not the Trustee.

What Constitutes a Breach of Fiduciary Duty?

What constitutes a breach of fiduciary duty? Well first, let us go over the responsibilities of the Trustee, Executor, and Estate Administrators to understand their responsibilities better. First and foremost, any action a Trustee takes must show their efforts were for the Trustor and beneficiaries wherein their duty of loyalty, impartiality, prudent investing, fiduciary accounting, defending against claims, and self-dealing are at the forefront before their wishes. Within the Trust are sections describing how the beneficiaries and heirs will receive their part of the estate. With that said, the Trustee must maintain transparency at all times with the beneficiaries.

So what constitutes a breach? Below are just some reasons to sue a Trust for breach their fiduciary duty:

  1. Trustee refuses to give an accounting: When mismanagement of a Trust is at its highest probability, typically, the Trustee and Co-Trustees refuse to provide updates to the beneficiaries. Not giving periodic updates is a sure sign for seeking counsel. Note: The Trust is a fiduciary arrangement that allows a third party, or Trustee, to manage and hold assets on behalf of a beneficiary or beneficiaries.
  2. Trustee stealing from a Trust: Stealing from a Trust, i.e., embezzlement, is a crime. Note: You cannot threaten to have someone charged criminally in hopes of taking advantage of their situation. Blackmailing exposes you to possible criminal liability.
  3. Self-Dealing – Self-dealing includes actions such as purchasing assets from the Trust, borrowing from the Trust even if it was repaid, investing in the Trustee’s own business, etc.

The bottom line, transparency is key to any successful Trust Administration process.

How Do I File a Breach of Fiduciary Complaint Against a Trustee

Documentation of suspicious activity is needed. You are required in order to show reasonable expectations, i.e., understanding time-frames, etc., with documentation following up with your concern with the Trustee. The next step is to find a highly sought out trust ligation firm that specializes in your exact case scenario. Moreover, ask questions regarding court time. 

We understand these are trying times. Here at Hess-Verdon, we have worked with thousands of clients throughout our tenure, and we are here to help you make the right decision.

Is Breach of Fiduciary Duty a Crime

A breach of fiduciary duty is not a criminal act but can be associated with one. For example, if the Trustee was self-dealing, e.g., selling a property, for instance, way below fair market value to a friend or themselves, then a court may see this as a form of embezzlement. Embezzlement is a crime. In the case of negligence, then it’s not a crime, but the beneficiaries still may go after the Trustee in civil court.

How Long does it take to Settle a Trust

Settling a Trust is a subjective question because each Trust is slightly different from another. For example, there may be several properties to sell, while another Trust has no real estate. But if you are looking for an average time-frame, Trust Administration is between 12-18 months. 

 

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