What Happens if My Trustee Fails to Follow the Terms of My Trust?
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What Would Happen if My Trustee Doesn’t Carry Out Their Duties?
If a trustee fails to follow a court order requiring compliance, the court could hold the trustee in contempt. Continued noncompliance may also support the trustee’s suspension or removal. During trust administration, a trustee’s failure to comply with the trust terms is one reason beneficiaries may find themselves in court.
A trustee is required to abide by the terms of a trust. If the trustee fails to do so, a beneficiary may have legal recourse. One benefit of naming co-trustees is that they may hold one another accountable. In addition, a trust may provide a method for removing a trustee and appointing the next successor trustee. If the document does not provide a workable replacement procedure, a qualified beneficiary may petition the court to review the trustee’s actions and request appropriate relief.
Trustees play an important role in overseeing and managing a trust, and they must fulfill the fiduciary duties that apply to trust administration. They are responsible for following the trust’s instructions and properly managing and distributing its assets. A trustee who breaches those duties may be held liable for resulting losses.
Actions to Take Against a Trustee
If your named trustee has breached their fiduciary duty, a beneficiary has several options:
- Contact an attorney to help communicate with the trustee. This can involve requesting a trust accounting and distribution through your attorney. The lawyer can also advise on expectations and help resolve disputes with the trustee.
- File a petition for trust accounting and distribution. This is done through the court and requires that the trustee provide a full accounting and documentation of the financial information.
- Petition the court to suspend and remove the trustee. This may require a court hearing at which the beneficiaries will need to present evidence showing why removal is necessary.
Trust administration can be complex and confusing. It is recommended that trustees work with an experienced attorney to help guide them through the trust administration process to help minimize and avoid disputes or miscommunication with beneficiaries.
When a Trustee’s Conduct May Require Further Review
A disagreement with a trustee does not automatically mean that the trustee has violated the trust. Some trusts give trustees discretion over investments, distributions, expenses, or timing. The issue is whether the trustee acted within the authority granted by the document and fulfilled the duties that apply to the administration.
Warning signs may include unexplained delays, missing financial records, distributions that appear inconsistent with the trust, personal use of trust property, unequal treatment that the trust does not permit, or refusal to provide information that a beneficiary is entitled to receive. Reviewing the trust terms alongside the trustee’s records can help determine whether the issue is poor administration or a possible fiduciary breach.
Information a Beneficiary May Request
A beneficiary who has concerns may begin by requesting information in writing. Depending on the trust terms and applicable law, the requested materials may include accounting, bank statements, investment reports, tax documents, receipts, property records, and explanations for distributions or expenses.
The request should identify the information needed and the reason for the concern. Beneficiaries should also keep copies of emails, letters, prior accountings, and communications. These records may become important if the trustee does not respond or if court action becomes necessary.
Possible Court Remedies
When informal efforts do not resolve the problem, a beneficiary may ask the court for relief. Depending on the trustee’s conduct, the trust terms, and the harm involved, the court may order the trustee to perform a required duty, stop improper conduct, provide an accounting, restore trust property, repay losses, or return an improper benefit.
The court may also reduce trustee compensation, appoint a temporary fiduciary, suspend the trustee, or remove the trustee when the facts support that result. Removal is not automatic, and the court will generally review whether the trustee committed a serious breach, failed to administer the trust properly, created a substantial conflict, or otherwise placed the trust or beneficiaries at risk.
Can a Trustee Be Personally Liable?
A trustee may be personally responsible when a breach causes financial harm to the trust or produces an improper personal benefit. Liability may include the amount needed to restore trust property or place the trust in the position it would have held without the breach.
A poor investment result alone does not necessarily establish liability. The review usually focuses on how the trustee made the decision, what information was available, whether the trustee acted in good faith, and whether the required standard of care was followed.
Frequently Asked Questions
Can a Beneficiary Remove a Trustee Without Going to Court?
Possibly. The trust may include a removal procedure that allows beneficiaries, co-trustees, or another named person to replace the trustee. If the document does not provide a workable method, court involvement may be required.
Can a Beneficiary Request a Trust Accounting?
Yes. A beneficiary may request information about trust assets, income, expenses, transactions, and distributions. Whether a formal accounting is required will depend on the trust terms and applicable law.
What Happens After a Trustee Is Removed?
A successor trustee usually takes control according to the trust or court order. The former trustee may be required to transfer assets, records, tax documents, passwords, and other information needed to continue the administration.
How Soon Should a Beneficiary Raise a Concern?
A beneficiary should act promptly after discovering missing information, delayed distributions, unexplained transactions, or possible misuse of trust property. Waiting may make records harder to obtain and may affect the time available to pursue a claim.
Address Trustee Concerns Before They Grow
Trustee disputes can affect distributions, tax reporting, family relationships, and the value of trust property. Anthony J. Madonia & Associates reviews trust terms, fiduciary conduct, accountings, and available remedies for beneficiaries and trustees. Learn more about the firm’s direct, relationship-focused approach on the About Us page. For help evaluating the next step, contact us today.