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Why do Beneficiaries take Trustees to Court?

 

When a family trust is created

 

The Settlor must name beneficiaries to inherit the assets one day, as well as name a trustee to administer the trust in the meantime. Often, a trustee is a lawyer, trust company or professional that is equipped to manage the ongoing needs of the trust, so that assets are protected and all legal requirements are met. What if trustees fail to do their job, though? Do beneficiaries have any recourse to protect the assets that will one day be theirs? The answer is yes - beneficiaries can take trustees to court. But why would they do so?

 

Poor Administration

 

Trust beneficiaries have certain rights, including the right to annual reports and accounting information regarding the trust. If these items are not forthcoming or if annual reports show that the trustee is not acting in the best interest of the beneficiaries (investing poorly, for example, or failing to pay applicable taxes on gains), beneficiaries may go to court to request a new trustee. They can also do so if the trustee is hard to deal with, refuses to communicate with beneficiaries, or is negligent in his/her duties in any way.

 

Losses

 

If the trustee has acted in a way that is considered negligent, unscrupulous, or unlawful in any way and the trust assets have suffered as a result, beneficiaries are well within their rights to sue for reparations, including income that may have been earned.

 

To Terminate the Trust

 

When people create family trusts, they do so with a number of goals in mind. Mainly, they want to ensure that assets held in trust get passed along to intended beneficiaries and that outside claimants (creditors or other family members, for example) are unable to gain ownership of said assets. In many cases, this form of asset protection is also used so that the trust creator can continue using property even though he/she is technically no longer the owner.

Beneficiaries may decide to take the trustee to court in order to terminate the trust for two reasons. The first is if they feel that the intent of the trust has been accomplished. The second is if they feel that the original intent of the trust cannot be accomplished. All beneficiaries have to agree, however.

If, for example, the creator of the trust intended for trust funds to be used to send children to college, with remainders to be disbursed following completion of a degree, but one child refuses to go to college, holding up the settling of the trust for all beneficiaries, they may elect to try terminating the trust since the intent cannot be fulfilled. It may or may not work, but beneficiaries could decide to try anyway.

 

So why not learn more and register with TrustUs today.

After all, it's in your hands.