Common Disputes in Trust Administration
A trust is a legal document that forms a division of property rights. A trustee manages the assets in the trust according to the wishes of the creator of the trust, who is also known as the grantor. The beneficiaries of a trust benefit from the assets or property in accordance with the directions of the grantor. Some trusts have been in existence for decades even though the grantor of the trust has long passed away. As long as the sources of income generation or the property still exists, the trust can be in full operations for years. Because of the long lifespan of trust accounts, the trustees and beneficiaries end up having long-term business relationships. These relationships are not always harmonious and can result in legal battles where interests are in opposition.
Fiduciary Disputes with Beneficiaries
The trustee is also known as the fiduciary in the administration of trust account. The trustee is called a fiduciary because of the level of accountability he or she has to the beneficiaries. In the legal sense, fiduciary duty is the highest form of duty one person can owe another. The person who has fiduciary duty in a trustee-beneficiary relationship must exact all duties with utmost care keeping the beneficiaries interest in mind. Breach of fiduciary duty requires payment from the fiduciary to make the beneficiary whole. Common disputes between the fiduciary and beneficiary can include a scenario where a beneficiary claims that the trustee is not giving the beneficiary what is due based on the interpretation of the trust terms. For example, a father assigns his children as beneficiaries in a trust with instructions to the trustee to only distribute funds for needs related to the beneficiary’s education. If the beneficiary requests money for a personal trip, and wants to substantiate it as education-related, conflict may arise where the trustee does not believe a personal trip falls under “education.” That is why the language of a trust account should be carefully crafted to match the true intent of the grantor.
Mismanagement by the Fiduciary
Trustees and beneficiaries getting into disputes about how the trustee is distributing the funds is one source of litigation. Another reason for disputes is when the fiduciary breaches the standard of care. One way the fiduciary can usurp the standard of care is by mismanaging the trust funds. The beneficiaries have the authority to audit the trustee to ensure that the funds are being distributed properly. Where a trustee is mismanaging the trust funds, the beneficiaries have a cause of action for breach of fiduciary duty. Mismanagement of funds can come in the form of commingling the trust funds with that of their personal financial accounts. Breach of fiduciary duty also occurs when the trustee actually takes out assets from the trust and uses it for his or her own purposes.
Reach Out to Us Today for Help
We provide legal assistance to individuals who wish to explore their trust options. Our legal team has years of experience advising on estate planning issues. We will tailor advice based on your unique circumstances. Call the Law Offices of Larry E. Bray, P.A. in West Palm Beach to determine the options that best fits your needs.