Trustee Misbehaving? It Can Have Dire Consequences – Part 1
Co–authored by Kristine M. Scott, Estate Planning Associate
The role of Trustee comes with very serious responsibilities.
Not only has the person who created the trust, the Grantor, relied on that person to fulfill the Grantor’s intentions after his or her death, the beneficiaries rely on Trustees to perform the Trustee role in their best interests.
In some cases, the Trustee may be the only means for a beneficiary to pay everyday living expenses, medical costs, and the like. For those people, a less than stellar performance by the Trustee could result in dire consequences.
The Potential Consequences of Trustee Misbehavior
Let’s look at an example of what could happen if a Trustee doesn’t perform the role well.
Sue inherited over $3 million dollars in trust from her Aunt. The Trustee sent a letter to Sue informing her that she was a beneficiary under her Aunt’s trust but failed to tell Sue what she would receive. Not knowing that her Aunt had that kind of money, Sue thought nothing of the letter from the Trustee.
While she was given a copy of the trust and knew that the Trustee could help her with payments for health, education, maintenance, and support (sometimes referred to as HEMS), the Trustee was unresponsive to her questions.
Further, the Trustee was required to provide periodic accountings of the trust to Sue. Yet, for years, the Trustee never inquired into Sue’s financial well-being, nor did he make any distributions to her.
Notwithstanding that, Sue had been laid off from her job, lost her medical insurance, and became homeless.
Potential Remedies for Trustee Misbehavior
Obviously, in this case, it does not take a knowledge of the law to know that the Trustee was not doing his job.
There are many remedies available to Sue, including a suit for damages. But would Sue have had any right to get rid of the Trustee for nonperformance? The trust did not say anything about this, but Florida Trust law provides specific mechanisms for removal of trustees.
Under Section 736.0706 of the Florida statutes, a trustee may be removed by the court “for cause.” Cause for removal can include serious negligence of the trustee, a lack of cooperation among multiple trustees, and an “unfitness, unwillingness, or persistent failure to effectively” manage the trust.
Further, under some circumstances, a trustee may be removed “without cause” at the request of the trust beneficiaries, or upon a showing that a substantial change in circumstances has occurred which was unanticipated by the trust grantor. Removal on these grounds does not require any proof that the trustee breached his fiduciary duty or committed malfeasance. All that is required is that removing the trustee best serves the interests of the beneficiaries, is not inconsistent with any material purpose of the trust, and that a suitable successor trustee is available to replace the “fired” trustee.
Seek Help If Your Currently Active Trustee Is Misbehaving
Are you a trust beneficiary who believes your currently acting trustee is not acting in your best interests? Or that he or she is failing to provide you with reasonable financial information concerning the trust?
If so, we recommend scheduling a consultation with our office to determine whether that trustee may be committing a breach of trust.
How do you know if your trustee really should be fired? Tune in next week for Trustee Misbehaving – Part 2: Fireable Offenses.Share