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When you can no longer trust a trustee …

by | Jul 8, 2021 | Estate Planning

As the beneficiary of a trust, you are grateful to your loved one who had the foresight to create this important estate-planning tool. As a result, you and other beneficiaries may have access to significant assets for the rest of your lives.

That will happen, though, only if the trust is properly managed. A trustee has the role of managing the trust, while controlling the distribution of its assets to beneficiaries. This person carries out the wishes of the trust’s creator, known as a donor or grantor. But, sometimes, the person in this role is fumbling his or her duties through incompetence and even breach of fiduciary duty.

Signs of trustee abuse

If you suspect that the trust is not properly managed, promptly act. You may try having the person removed as the trustee and take the necessary legal steps to make sure that the abuse no longer continues.

Here are signs that a trustee is shirking his or her responsibilities:

  • Non-existent or the trickling of distributions to beneficiaries: Withholding distributions is a red flag, pointing to potential signs of abuse.
  • Poor, inadequate and sloppy record-keeping: There should be clear records of the money that enters the trust and investments made with money from the trust. If you request these records and the trustee balks or delays, this is a sign something is wrong.
  • Conflict of interest: The best interests of the trust should be top of mind for any trustee. Sometimes, trustees do not do this, deciding that they really have their own personal interests in mind by making personal investments or purchasing things for themselves.
  • Commingling the trust’s assets with the trustee’s assets: The assets from a trust should remain in that trust and never mixed in with assets owned by a trustee. This represents blatant abuse.

In this estate planning scenario, litigation is an option toward resolution. The root of the word “trustee” is trust. If that trust erodes, you must figure out how to overcome these problems caused by an incompetent or dishonest trustee.

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