TRUSTEES OWE YOU A LEGAL DUTY OF LOYALTY AND HONESTY
Trustees have duties to you, the beneficiary, and the trust when they assume their office of trustee. Trustees are obligated to administer the trust according to the terms set forth in the trust instrument, which provides instructions from the trust Settlor (person who established the trust) to the named and successor trustees. Both individual and corporate trustees are also subject to the laws of the Commonwealth of Massachusetts. There are also numerous case law decisions issued by Massachusetts judges on various trust issues. Massachusetts is considered to be on the forefront and one of the pioneering jurisdictions in the area of trusts. The Probate Courts and Superior Courts in Massachusetts also have legal and equitable powers to intervene in trust disputes so as settle unfairness inherent in the administration of a trust.
Trustees have a fiduciary duty to the beneficiaries of the trust, which is a legal relationship of strict loyalty to the beneficiaries. If there is more than one beneficiary of the trust, the trustee must act impartially and fairly towards every beneficiaries when distributing, managing, and investing trust assets. Depending on the trust language and nature of a wrongful act committed by a trustee, a trustee can be held personally liable for intentional acts, such as the intermingling (comingling) and personal use of trust property for personal financial gain. Trustees may also be held liable for intentional acts such as: fraud or conversion; self-benefiting investment of trust property; imprudent investment of trust funds, improper management or distribution of trust property or funds, failure to account to the beneficiaries, and/or failure to file tax returns with the Massachusetts Department of Revenue and Internal Revenue Service.
A Trustee is under a legal obligation (the Massachusetts Prudent Investor Act) to make careful and wise investments by investing trust assets as a prudent investor would, while exercising reasonable care, skill, and caution in making such investments. A trustee must reasonably diversify trust investments, unless it is unreasonable, so as to spread out risk among several types of investments. A trustee must also make all investments in the interests of the beneficiaries and cannot personally benefit from investments without the knowledge and/or consent of the beneficiaries of the trust. Often Trustees rely on their own investing skills, which results in poor investments to the determinant of the trust and beneficiaries.
If you suspect that your trustee has violated any of these duties to you or have been treated unfairly by a trustee, contact us immediately so that we may help you evaluate your case.
ACCOUNTING ACTIONS AGAINST TRUSTEES
A Trustee has a legal duty to produce an annual accounting to the beneficiaries after the death of the Settlor of the trust. Most, if not all, well drafted trust instruments will also impose upon a trustees a duty to account. An accounting allows transparency into the financial affairs of the trust. If you have questions about the status of assets, income, expenses, and disbursements, an account will provide you with this information so that you can make an informed decision as to whether the trust is being properly administered. In this case, you will be able to evaluate, all income received, disbursements made to beneficiaries, and other expenses, including trustee compensation, incurred by the trust. An accounting may also provide some evidence as to whether a trustee has committed fraud or conversion of trust assets, or has engaged in transactions that personally benefit the trustee or his/her interests.
FAMILY MEMBERS MAKE POOR TRUSTEES
Family member trustees typically are non-professional trustees who misunderstand role of trustee and their duties to the beneficiaries and trust. These persons are inexperienced as trustees and have no prior experience in handling complex trust matters, and are unaware of how to effectively administer a trust. Family member trustees often convince themselves that their appointment demonstrates that they were the preferred / favorite member of the family, or that their appointment of trustee validates their qualifications to serve as trustee. These sentiments are used as justification for them to act according to their own interpretations of the trust or upon conversations with the Trust Settlor that are not part of the trust document.
Some of common problems associated with family member trustees include the following:
Lack of experience or competence in management of investments and other property. Individual trustees are often tasked with investing hundreds, if not millions, of dollars, and they fail to develop and implement a strong investment strategy for the short and long term needs of the beneficiaries;
A failure to effectively communicate with the beneficiaries of the trust. This includes vague or incomplete responses, or an entire lack of communication from the trustee. Trustees often fail to respond adequately to requests concerning the amount and nature property held by the trust, disbursements, trust expenses, and other matters related to trust property and its administration. At times, Trustee refuse or fail to provide a copy of the trust instrument to the beneficiaries. Other times, the Trustees fails to take into account the financial needs of the beneficiaries;
A failure to make mandatory disbursements of trust property according to the terms of the trust, or an abuse of discretion on behalf of the trustee by refusing to disburse funds;
An inability or unwillingness to provide an accounting to the beneficiaries of the trust, which specifically describes the property held by the trust, all income received, disbursements made to beneficiaries, and other expenses, including trustee compensation, incurred by the trust.
Ineffectiveness or omission concerning an opportunity to acquire income from trust property. Family member trustees often cause the trust to incur considerable expenses by holding onto a particular trust asset. This type of economic waste causes damage to the trust and the beneficiaries by depleting trust assets and forgoing opportunities to increase the principal of the trust.
A failure to terminate or make final distributions from a trust when the trust instrument calls for its termination on a specific condition.