People in a variety of circumstances use trusts to establish a personal legacy. Parents with multiple children might create trusts in the hopes of preventing their offspring from fighting over their assets after they die, for example.
A trustee typically needs to follow the instructions provided by the trustor and do their best to properly manage and distribute trust resources. Unfortunately, family members of the trustor and beneficiaries of the trust may eventually have reason to question whether a trustee faithfully fulfilled their role.
What happens in scenarios where people have reason to believe a trustee has mismanaged resources or used their position for personal enrichment?
Certain behaviors violate fiduciary duty
A trustee is in a role defined by responsibility and personal authority. They have control over trust assets and have the authority to make decisions about those assets. They have a fiduciary duty to trust beneficiaries. That means they should put the best interests of the beneficiaries of the trust above all other considerations, including their own preferences.
Unfortunately, it can be very difficult for those with access to valuable resources to set aside their personal desires. In some cases, people may breach their fiduciary duty by embezzling from the trust. They may retain assets for themselves or sell them to themselves for less than the fair market value.
They might hire a company they run or one owned by their spouse at an above-market rate to serve the trust. Any actions that enrich the trustee at the expense of the trust or its beneficiaries is a breach of fiduciary duty.
It is also inappropriate for a trustee to allow their personal feelings about individual beneficiaries to influence how they distribute trust resources. For example, they might refuse to distribute high-value property to a beneficiary with whom they have had a difficult relationship.
They might give preferential treatment to those with whom they have a more positive rapport. Displaying favoritism and refusing to follow the instructions included in trust documents are also violations of a trustee’s fiduciary duty.
Beneficiaries can replace misbehaving trustees
The good news for those frustrated by the inappropriate or unprofessional conduct of a trustee is that they do not have to accept that misconduct without any options for recourse. So long as they have evidence showing that the trustee refuses to follow trust instructions or uses their position for personal gain, beneficiaries may be able to ask the probate courts to remove a trustee and replace them with someone better able to fulfill the duties inherent in that role.
The misconduct of a trustee can diminish the value of trust resources and deprive people of the support that a trustor hoped to provide for them. Initiating trust litigation can potentially help people uphold the legacy wishes of a trustor and preserve the value of the assets that they used to fund a trust.