When your family manages its money using a trust, your comfort and livelihoods may depend on the trustee doing their job well. Unfortunately, sometimes the people managing your money will not live up to the task. Find out what you can do when you discover trustees behaving badly.
The Trustee’s Duties
Before we can address what happens when trustees behave badly, we need to know what it looks like when things are going well. According to the Florida Trust Code, trustees have multiple overlapping duties to the trust and its beneficiaries (your family). Below, we focus on six categories where issues can often arise, including examples of what might constitute violations of each duty:
Duty to Administer Trust
This duty requires a trustee to make good faith efforts to fulfill the terms and purposes of the trust itself. In other words, the trustee needs to make reasonable efforts to to live up to the duties described in the trust document. A violation of the duty to administer trust could be:
Distributing money earmarked for a different purpose
Failing to provide for a beneficiary’s needs
Unreasonably granting or denying requests for trust distributions based on his or her own judgments rather than the restrictions in the trust documents.
Duty of Loyalty
When it comes to handling trust affairs, a trustee is required to put the beneficiaries’ needs before their own. This usually means a trustee should not gain personal benefit from administering the trust (beyond a reasonable payment for their services). Violations of the duty of loyalty may be:
Transferring trust money into the trustee’s personal account
Using trust funds for personal expenses
Selling the trust property or services at a profit to themselves or their business
Duty of Impartiality
It is not the trustee’s job to pick favorites among the beneficiaries. Instead, the trustee is required to act impartially, balancing the beneficiaries’ respective interests. When a trustee is behaving badly, this could look like:
Paying one beneficiary more than their designated share
Distributing funds to one beneficiary while denying another funds for similar activities
Approving expenses for one beneficiary when they will inappropriately hurt the trust’s principal
Duty of Prudent Administration
A trustee must use all reasonable care, skill, and caution when administering the trust. Violating this duty could be:
Falling for a scam that loses the trust money
Failing to take reasonable steps to protect trust assets
Ignoring necessary maintenance or upkeep to trust property
Duty to Control Administration Expenses
Remember that trustees are entitled to be paid for their services. When these payments, or other expenses dip into the trust principal, a trustee is required to take steps to keep those costs reasonable. Violations of this duty may be:
Paying themselves an unreasonably high fee for trust administration
Failing to get comparative bids for services needed by the trust
Making quid pro quo arrangements with preferred vendors who charge higher prices
Duty to Control and Protect Trust Property
Trustees’ primary responsibility is to protect the items and assets in the trust and see to their administration. When a trustee fails this duty it could look like:
Failing to pay taxes or necessary payments related to a property
Allowing others outside the trust to use or occupy the property
Neglecting to manage investment accounts to protect the value of trust assets
Duty to Inform and Account
The trustee is required to keep the beneficiaries informed about the state of the trust. The trust documents may require regular accounting updates. Even if it doesn’t, beneficiaries may make reasonable requests for information. The way that most beneficiaries learn about their trustees behaving badly is when they breach their duty to inform and account for the trust. When the trust’s annual accounting doesn’t add up or goes missing, beneficiaries may find that the trustee has been violating other parts of their fiduciary duties.
What to Do When Trustees Breach Their Fiduciary Duties
When beneficiaries learn of their trustees behaving badly, they may need the help of a probate lawyer to take the matter to court. By suing for a breach of fiduciary duties, a trust’s beneficiaries can remove the trustee, replace him or her with someone they trust, and be compensated for the financial harm caused by the trustee’s malfeasance or bad choices.
Suing a trustee for a breach of fiduciary duties often involves careful accounting and the use of financial experts to explain what went wrong. The process can take time and many hours of attorney work to unravel the financial consequences of the trustees actions. However, depending on the nature of the breach, and whether the trustee was sued as an individual or in their role within the trust, a trustee may have to pay the trust back for attorney fees and costs related to the lawsuit.
If you think your family’s trustees have violated their fiduciary duty and managed your family's trust in bad faith, you should speak to a probate attorney as soon as possible. At Harrison Estate Law, P.A., our experienced estate and probate team can help you demand and investigate your trust’s accountings, identify the breach in fiduciary duty, and decide if there are grounds to file a lawsuit against the trustee. We will help you be sure your family members’ trust is handled properly so it can provide for your family’s needs for years to come. Contact us here or call 352-559-9828 to get help today.