When a trust is created, the Trustee of that trust is appointed by the Settlor. A Settlor may appoint anyone he/she wishes as the Trustee. That Trustee has a fiduciary duty to the beneficiaries of the trust, meaning that the Trustee must treat the trust assets with more care and invest with more caution that he/she would with his/her own assets. In addition, a Trustee is legally required to follow all the terms of the trust agreement unless a term is impossible, illegal, or unconscionable. Occasionally, however, a Trustee fails to abide by the trust terms. The Port St. Lucie trust administration attorneys at Kulas Law Group explain what a beneficiary can do if the Trustee isn’t abiding by the trust terms.
Why Might a Trustee Fail to Abide by the Terms of a Trust?
There are, of course, an infinite number of reasons why a Trustee might fail to administer a trust according to the trust terms. Some of the most common reasons why a Trustee fails to abide by the trust terms include:
- The Trustee doesn’t understand the trust terms. All too often, the problem boils down to the Trustee not understanding the terms of the trust and/or the Trustee’s duties under the trust. Settlers frequently appoint someone close to them as Trustee despite the fact that the individual has no background in finance or law. This often results in a well-meaning Trustee, but one who doesn’t really understand his/her obligations as Trustee.
- The Trustee is trying to cover up wrongdoing. Of much greater concern is the Trustee who isn’t distributing assets as required because there are no assets left to distribute. The Trustee may have co-mingled funds, or embezzled assets, or made risky investments that resulted in the loss of trust assets.
- The Trustee is simply being lazy. Lazy might be a bit harsh, but sometimes a Trustee simply doesn’t prioritize his/her job as Trustee which results in missed distributions. If the Trustee is not a professional, he/she probably has a full-time job and/or family and may simply not have the time that is truly required to properly administer the trust.
Your Rights as a Beneficiary
The terms of the trust agreement will dictate many of the rights of the beneficiaries of the trust; however, other rights are rights conferred on a beneficiary by law. The Settlor of a trust has the ability to grant beneficiaries a variety of rights within the trust agreement. The trust terms, therefore, may specifically grant a beneficiary rights with regard to removal of the Trustee. The Settlor may give the beneficiaries the ability to remove a Trustee if a majority of those beneficiaries vote to do so or may give a single beneficiary the right to remove a Trustee.
Sometimes, however, a trust agreement is silent on the issue of beneficiary rights. That does not mean that beneficiaries have no rights though. On the contrary, the law protects beneficiaries by giving them certain rights even if the trust agreement fails to provide specific rights. For example, as the beneficiary of a trust you have a:
- Right to distributions – if you are a current beneficiary, you have a right to receive any distributions due to you under the terms of the trust agreement.
- Right to communication/information – you have the right to be kept informed about trust business and to be able to communicate with the Trustee of the trust.
- Right to an accounting – you have the right to receive a full accounting showing things such as what assets the trust holds, how much interest has been earned by the trust, and what expenses have been paid by the trust.
- Right to petition a court to remove a Trustee or terminate a trust – even if the Settlor did not grant you the authority to remove a Trustee directly, you always have the right to petition a court for the Trustee’s removal. Of course, you will need to convince the court that removing the Trustee is in the best interest of the trust and of all the beneficiaries.
If you find yourself faced with a Trustee who isn’t abiding by the terms of a trust in which you are a beneficiary, consult with an experienced trust administration attorney right away to discuss your legal options.
Contact Florida Trust Attorneys
To learn more, please download our FREE solid estate plan checklist. If you have specific questions about how a Family Wealth Trust might fit into your estate plan, please contact the experienced Florida trust attorneys at Kulas Law Group by calling (772) 398-0720 to schedule an appointment.