ABUSE OF POWER BY TRUSTEES

ABUSE OF POWER BY TRUSTEES

When you think of a trust the first image that may come to mind is a very wealthy family with inherited wealth passed down from generation to generation.  However, that is not always the case.  Trusts are a common and effective estate planning tool used to avoid the hassles and expenses of probate.  Unfortunately, they can sometimes lead to a great deal of family discord if the trustee is overwhelmed with too much responsibility or abuses his or her power.

A trust is a legal arrangement that allows a third party, a “trustee,” to hold and direct assets in a trust fund on behalf of a beneficiary or several beneficiaries.  The person whose property goes into the trust is called the “settlor” of the trust.  The trustee acts as the legal owner of the trust assets, and is responsible for handling any of the assets held in trust, including investing assets held in trust, making all tax filings for the trust, and distributing the assets according to the terms of the trust.  The trustee must also see that the beneficiaries are kept informed about the trust’s status.  This is a lot of responsibility, too much sometimes.

Often the oldest adult child or other close relative becomes trustee.  In other cases, a person who has gotten close to the settlor as the settlor gets older trying to curry favor is named as trustee.   Trustees are sometimes chosen without regard to their ability to serve as trustee or to personality conflicts they might have with beneficiaries.  This can lead a trustee to think they have a lot of power.  There is typically no court or other government oversight, so some trustees abuse their power.  Examples of such abuse include: unreasonably delaying the distribution of assets to beneficiaries; not paying a beneficiary his or her full share; failing to keep beneficiaries adequately informed; and self-dealing by taking assets from the trust or buying them at an artificially low value.

Fortunately, beneficiaries have legal remedies against difficult trustees.  The Probate Court can remove a trustee or order them to take appropriate action.  Often these disputes can be resolved by a competent trust litigation attorney through communication without filing a lawsuit.  If you are a beneficiary of a trust and feel that the trustee is abusing his or her power, or is just not sufficiently skilled to carry out the duties of trustee, we encourage you to call one of our experienced trust litigation attorneys for a consultation.

written by Attorney Jack Cooper