Do you want to learn how to stop bad trustees from stealing your inheritance?
Trustee mismanagement can be devastating for a family’s financial legacy. When a trustee mishandles assets, it can wipe out wealth and leave beneficiaries with nothing.
The crazy thing?
It’s much more common than people think. Currently, there is over $124 trillion of wealth set to transfer from one generation to the next by 2048. That’s trillions of dollars coursing through trusts, estates, beneficiaries, and yes… trustees.
The good news is that beneficiaries have legal recourse.
Working with experienced probate litigation attorneys can help hold a trustee accountable for their actions and recover lost assets before it’s too late.
In this article, you’ll learn…
What you’ll discover:
- Trustee Mismanagement Definition
- Warning Signs Of Trustee Mismanagement
- Beneficiary Rights When Trustees Are Mismanaging Money
- Options For Taking Legal Action Against Trustees
- How Trustees Are Held Accountable By The Courts
- Things To Do If You Suspect Mismanagement
What Is Trustee Mismanagement?
Trustees have a fiduciary duty to manage money in the best interest of the beneficiaries. To fulfill their role, trustees must handle assets responsibly, honestly, and with care. Basically, they can’t just put their interests before those of the beneficiaries.
When they don’t do these things, it’s called trustee mismanagement.
Trustee mismanagement can be outright malicious, like stealing from the trust. It can also come in the form of negligence and poor behavior.
Either way… beneficiaries are the ones who lose.
Let’s take a look at some examples of trustee malfeasance:
- Self dealing (using trust assets for personal gain)
- Making poor investment choices
- Failure to make timely distributions
- Lack of transparency about financial records
Some actions are blatantly illegal, while others exist in a bit of a gray area. But when left unchecked, irresponsible trustees can do massive financial damage to trusts and estates.
Warning Signs Of Trustee Mismanagement
Mismanagement isn’t always obvious. Some unethical trustees can be subtle about their behavior. But there are almost always signs that something is amiss.
Catch these bad trustees early, and you can stop them before they ruin your family’s legacy. Here’s what to look out for:
- Unexplained losses. If you notice that trust value is going down without a good explanation, there may be a problem.
- Missing paperwork. Trustees should keep meticulous records of every transaction. If they won’t share documentation, that’s a red flag.
- Delays. Whether it’s distributions being inexplicably delayed or questions going unanswered… if a trustee is stringing you along, it’s probably because they’re hiding something.
- Changes in lifestyle. If a trustee suddenly seems to have more money than they should, consider where that money is coming from.
The reality is that lots of beneficiaries tend to brush off these warning signs. Especially if the trustee in question is a close family member or friend.
Don’t make this mistake.
Friendship shouldn’t get someone special treatment when it comes to financial misconduct. Trustee mismanagement is common — especially when there isn’t a will involved. According to a recent Caring.com study, only 32% of Americans have a will. The rest are basically handing their entire estate planning process over to a trustee.
Catch problems early and you can prevent them from escalating.
Beneficiary Rights When Trustees Are Mismanaging Money
When trustees violate their fiduciary duty, beneficiaries have legal rights they can exercise to correct the problem. A few options include:
Demand a Trust Accounting
Beneficiaries are entitled to an accounting of trust activities. If a trustee refuses to comply, it can be used as grounds to bring legal action against them.
Petition to Remove the Trustee
If a trustee has seriously violated their fiduciary duties, a court can petition to remove them altogether. Just know that the court takes removing a trustee seriously. They’re much more likely to enforce stricter rules and appoint a successor trustee to ensure it doesn’t happen again.
Seek Monetary Recovery
If the trust has suffered monetary losses due to mismanagement, a court can order the trustee to make the trust whole again. This is known as a surcharge.
Request Injunctive Relief
In some cases, courts can freeze trust assets. This prevents any further damaging transactions from occurring while the case is being decided.
It’s even possible to file criminal charges against trustees if they steal from or defraud a trust. Don’t be fooled into trusting someone just because family ties exist.
Options For Taking Legal Action Against Trustees
If you have reason to believe that a trustee is being dishonest about how they’re handling trust assets, you can take legal action against them.
Here are your options:
- Sue for breach of fiduciary duty.
- Request a trust accounting.
- Petition for trustee removal.
How Trustees Are Held Accountable By The Courts
The court looks at a variety of factors when hearing cases regarding trustee misconduct. Some things they consider include:
- Was the trustee in violation of the trust document?
- Did they fail to uphold their fiduciary duties?
- How much financial damage was done to the trust?
- Was their misconduct intentional?
What’s interesting is that in many states, once a beneficiary proves there was possible misconduct, the trustee has to prove they did nothing wrong. This shifts the burden of proof to the trustee.
If the trustee loses a case like this, the court has many ways they can hold the trustee accountable. For starters, they can be removed from their position entirely. The court can also order accountings and financial recovery (or surcharges).
Things To Do If You Suspect Mismanagement
Suspecting a trustee isn’t enough. If you don’t take action, they’ll continue to mismanage your assets.
Here are some things you can do to intervene:
- Review the trust document and understand the trustee’s powers.
- Ask for financial records to spot any irregularities.
- Document everything related to your case against the trustee.
- Hire a probate litigation attorney to fight for your inheritance.
A good attorney will be able to advise you on how to best approach your unique situation. They’ll also act quickly to beat any statute of limitations for your potential claim.
Wrapping Things Up
Trustee mismanagement is more common than you think. Unfortunately, not everyone knows what to do when trustees take advantage of their position.
But you do now.
The worst thing you can do is to ignore warning signs. Figure out as soon as possible whether or not your trustee is honest, and take legal action immediately if they’re not.
Thankfully there are legal ways to force bad trustees to give your family inheritance back. And the right probate litigation attorney can make sure of it.
