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2 solutions when a trustee has damaged trust assets

On Behalf of | Apr 28, 2023 | Trusts |

A trustee has control over the maintenance and investment of trust resources, as well as the distribution of those assets to the beneficiaries of the trust. Nothing shatters the security of trust beneficiaries more thoroughly than the realization that a trustee has violated their fiduciary duty to the trust or done something truly incompetent. Maybe there are unignorable signs of embezzlement, or perhaps their incompetence has led to them taking actions that have damaged the trust’s resources and reduced its value.

When a trustee has failed to put the best interests of beneficiaries first and has caused harm as a result of incompetence or misconduct, beneficiaries may have no viable choice save to go to probate court. These are some of the solutions most commonly sought in a contested trust case involving major failings by a trustee.

1. The replacement of the trustee

Particularly in scenarios where family members blame incompetence or laziness for the issues the trust currently faces, the best solution may simply be to remove the trustee and replace them with someone else.

Probate court judges may consider specific candidates proposed by disappointed beneficiaries or may make a suggestion based on their knowledge of the situation. In some cases, it may even be possible to bring in a professional trustee to protect against the possibility of the situation repeating itself. Removing a trustee from their role can serve as public commentary on their prior failings and can prevent future damage to the trust and its resources.

2. The repayment of misappropriated resources

In scenarios where there is a clear paper trail showing that someone embezzled, overcharged the estate for services provided or undervalued estate resources for personal gain, beneficiaries could potentially take action to demand reimbursement for value lost. Beneficiaries of a trust in those interested in its administration often need to carefully monitor the value of trust resources and the actions of the trustee to protect against misconduct and mismanagement.

Knowing when to seek legal guidance and when to take action concerning trust administration challenges can help protect trust resources and the best interests of trust beneficiaries.