When someone dies, the person typically leaves behind a trust or a will. To divide or use the assets as per the instructions in the trust or the will, someone has to execute that trust or will. The person who executes the wishes of the grantor (the person who made the trust or will) is called the trustee. The trustee is responsible for managing any inheritance given to the beneficiaries, those people named in the trust or will as recipients of assets.
While individuals are still alive, they are typically the trustee of their own assets, but when they die, someone else manages the assets. Trustees must legally distribute the inheritance to the beneficiaries after settling all matters related to the estate, which can take the form of periodic payments over time, transferring of a specific asset like a business, car, or home, or even a lump-sum payment.
Administration of a trust
The trustee must be in charge of the administration process. This is a complicated legal process that entails things from taking inventory of the remaining property to settling any debts to distributing inheritance to beneficiaries. No court, including the probate court, supervises trust administration, although, if there are discrepancies, the courts can become involved. Trustees have a fiduciary duty to act in the best interest of the beneficiaries, and if they fail to do so, the beneficiaries have rights.
Can a beneficiary sue a trustee?
As a beneficiary, you should be dealing exclusively or at the very least almost entirely with the trustee as the administration process goes along. Therefore, you should get to know what a breach of duty is so that you can identify it if it happens and make sure that the living trust is enforced.
As the beneficiary, you can sue a trustee if they violate your rights, or there is a breach of duty.
- You are entitled as the beneficiary to a copy of the trust document.
- Your legal rights include being kept informed about the trust and what is happening with its administration.
- You are entitled to an accounting of the trust and the right to challenge it if there is a problem.
- The trustee must treat you impartially.
- As a beneficiary, you are entitled to timely distributions.
- Finally, you have the right to petition the court and have the trustee either suspended, removed, or replaced.
Remember that trustees are fiduciaries; they are never to favor one beneficiary over another. They have a duty to remain loyal and objective, prioritizing the interests of the beneficiaries over their own. They must also regularly provide trust beneficiaries with any pertinent information such as how much the trust is worth, what assets are going into the trust and what assets are leaving the trust. They have to communicate regularly and give periodic updates of the accounting for the trust.
Suing a trustee of a trust
There are several ways in which a trustee can breach these roles and leave themselves susceptible to being sued. When you sue a trustee, you can do so with the goal of suspending them so they can no longer make decisions about the trust while an investigation for criminal charges is ongoing. You can also choose to request to remove them entirely and the assets distributed in accordance with the trust immediately. Alternatively, you can request the probate court to replace the trustee with someone else.
In any of these cases you will have to prove the trustee favored one beneficiary over another, had no loyalty to the trust, was acting in their personal interests rather than those of the beneficiaries, committed a breach of fiduciary duties, failed to communicate, or in some other way violated the responsibilities entrusted to them.
What about criminal charges against trustee?
Pursuing criminal charges against a trustee can happen in specific cases when they committed a serious fiduciary crime such as taking advantage of their position to funnel assets into their personal accounts rather than those of the beneficiaries.
Suing a trustee for breach
To make a case and take the trustee to court, you need to prove they did something wrong, and this usually entails suing a trustee for breach of fiduciary duty. This is a legal term that means the trustee was not transparent in handling the finances and managing the estate assets.
The law gives trustees a lot of responsibilities, but beneficiaries can claim with the help of an attorney that the trustee refused to disperse money or assets under the terms of the estate, put their interests ahead of a beneficiary, mishandled the estate money, or refused to give information about what was going on.
When can beneficiaries sue the trustee?
There are specific time frames beneficiaries need to meet to sue the trustee.
Within 60 days of a trustee taking full responsibility of the trust, they have to give notice to any qualified beneficiaries they have accepted that responsibility. They also have to provide the full name and the address for the trustee to each beneficiary for proper communication thereafter.
Within 60 days after a trustee knows there was an irrevocable trust, they have to give notice of the identity of the settlor and gain rights to accounting.
A beneficiary cannot, therefore, sue a trustee right away; they have to give them time to fulfill their responsibilities. Only after there has been evidence of a breach or a trustee failing to follow the trust such as understanding the assets, managing them, getting death certificates, closing accounts and so forth, can a beneficiary pursue trust litigation to separate the current trustee from the trust property.
Examples of beneficiaries suing trustees
There are many examples of situations where families decide to use their legal rights to sue the trustee or pursue criminal charges.
John’s father owned multiple houses and a very successful business. Margaret was the trustee of the estate. John and his siblings, all beneficiaries, sent Margaret multiple requests for information, asking what was going on. Margaret refused to fulfill their requests and didn’t tell them what was happening. John took legal action by getting a lawyer and going to Probate Court. The judge had to determine whether there was a breach of fiduciary duty, and whether or not to remove Margaret and replace her with another person.
Aaron was named the trustee for a close family friend. The beneficiaries noticed that Aaron socialized regularly with one beneficiary in particular who was showering Aaron with gifts. Aaron began to make trust distributions and use legal options with the trust assets specifically to that beneficiary. The family began to suspect undue influence and a mishandling of estate funds. So, they began to document these meetings and decided they had to sue the trustee to ensure proper distribution of the assets to all the beneficiaries as per the deceased’s final wishes.
Overall, for a beneficiary to sue a trustee, there has to be serious criminal activity or breach of duty. There are many rights given to beneficiaries, but each beneficiary is not necessarily entitled to have the same active role when it comes to every single decision about the trust. Understanding these roles and responsibilities when it comes to trust property or asset management can help you as a beneficiary determine when there’s a breach.