We often receive calls from distressed potential clients dealing with the highly emotional situation involving the death of a loved one and the subsequent administration of their estate. This often occurs with the passing of the last parent and the entire estate needs to be distributed. Oftentimes the parents named one of their children as the successor trustee, who is the person responsible for administering the estate when they both pass.
Parents typically chose a child to serve in this trustee capacity because it seems easy and believe it will cause the least amount of fighting possible. However, sometimes this plan doesn't quite work they way it was intended, and in-fighting amongst the sibling beneficiaries ensues. So what happens when a bad trustee strikes?
If your sibling who is serving as a trustee is refusing to distribute property according to the terms of the trust, a letter should be sent demanding such be done. I wouldn't bother writing more than one letter because if the trustee wasn't responsive to the first letter, any subsequent letters would likely be futile.
This doesn't mean the trustee can continue administering the estate as he or she pleases. We can file a petition for instruction with the probate court requesting the court order the trustee to abide by the terms of the trust. This typically is the best remedy to this type of situation.
However, if the trustee is misusing the trust assets, this is an entirely different issue. The trustee doesn't have any legal right to benefit from the trust assets unless they are also a beneficiary, and only then they can receive their distribution in accordance to the terms of the trust. They can also receive reasonable renumeration for their time and effort, but absent that, they should not be using trust funds to buy boats, go on family vacations or paying their own personal debt. This is a misallocation of trust funds and is a breach of their fiduciary duty as the trustee, opening them personally to civil liability.
If the trustee has sold trust property without your permission, that is likely okay. Most trust agreements and the probate code give trustee broad powers to sell trust assets. However, the sell must be in the best interest of the trust and the beneficiaries. If it is found the trustee sold the property for less than market value, this again is a breach of their fiduciary duty and will subject them personally to civil liability.
If this were to occur, you may wish to recover the property, however, that is unlikely to occur. That is unless the sale involved fraud in which the purchaser was someone closely connected to the trustee and the below-market sale was done with the purpose of defrauding the trust. In that situation, the law does allow for the recovery of such property, but this is very rare.
Administering a trust or probate estate is highly technical and very detailed work. Unless the estate is very limited in size and scope, going it alone without an attorney is not advisable. If you are a trustee, there are many pitfalls that open you to personal liability. And if you're a beneficiary suffering from a bad trustee, it's time to get help in fixing the situation. No matter your role in the administration of the trust or probate estate, the cost of an attorney to help you manage the situation is well worth avoiding the stress and heartache if the administration ends up being litigated in probate court.
Contact us today to find out how we can help you in your time of need.