When the Trustee is not Trustworthy: Remedies for the Trust Beneficiary

Before my mother passed away, she established a living trust and named my sister as Trustee.  My sister, my two brothers and I are the beneficiaries of this trust.  I recently found out that my sister used my mother’s trust to pay for a cruise for herself and her daughter, and also remodeled her home with my mother’s trust monies.  What can I do?

Naming a Trustee of your Trust is perhaps the most important estate planning decision you make.  Unfortunately, this mother made the wrong decision in naming her daughter as Trustee after her death.  A Trustee has the fiduciary duty to act in good faith, in accordance with the Trust terms and purposes, and to act for the sole interest of the beneficiaries.  Even though the Trustee may herself be a beneficiary of the trust, she is breaching her duties as Trustee by using the trust assets for her personal benefit.

This beneficiary needs to act quickly to prevent the Trustee from continuing to spend the trust assets. If the Trustee/sister spends more trust assets than she is to receive as a beneficiary, it will be difficult to actually recover those trust assets from her.  The beneficiary should engage an attorney to file an emergency action to freeze the trust assets so the Trustee can’t continue to spend them; to remove the Trustee; to force her to account for her actions as trustee; and, ultimately, to pay back the misappropriated funds.  Because the Trustee acted intentionally in using trust assets for her own benefit, the beneficiary may be able to obtain punitive damages – a monetary penalty for breaching her duties to the trust – against the Trustee.

The Trustee will not be allowed to use trust assets to defend herself.  However, because the beneficiary is acting to protect the trust, it is possible that the beneficiary’s attorney’s fees will be paid from the trust assets.

To set up a consulatation to discuss your particular needs, contact the experienced elder law attorneys at Janna Dutton & Associates.

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