When someone sets up a trust, they appoint at least one trustee. The trustee is responsible for managing the assets of the trust for the benefit of the trust’s beneficiaries. Under California law, trustees are legally required to follow the instructions of the trust when distributing money and other assets.
In determining who should receive what, it’s the job of the trustee to review the instructions of the trust. This is why it’s so important for trustees to review the terms of the trust and speak with a qualified estate planning attorney before taking action.
While it’s not uncommon for a beneficiary of a trust to demand to receive more money or assets than the trust entitles him or her to, it’s also not uncommon for trustees to refuse to give money to a beneficiary. In some cases, it’s within their discretion to do so, but in others they are breaking the law.
When a trustee fails to distribute to a beneficiary that which is rightfully theirs, it’s most likely a breach, but when a beneficiary chooses not to do so because it’s within their discretion, it’s still important to ensure that it is truly within their sole discretion. A trustee can refuse to pay a beneficiary so long as they are permitted to under the constraints of the trust.
But whether a beneficiary is asking for distributions you’re not sure they are entitled to, or a trustee doesn’t know if it’s within their discretion to deny them, it’s best to contact and consult with trusted counsel.
What Are A Beneficiary’s Legal Options?
If a beneficiary has been denied payment from the trust, and the trust’s instructions prohibit the denial, the beneficiary may have legal options. One option is to pursue a claim for breach of fiduciary duty.
A fiduciary duty is established between the trustee and the beneficiaries of the trust as soon as the trustee accepts appointment to the position. Fiduciaries are held to the highest legal standard, called a “fiduciary duty.” In other words, trustees must administer the trust in the interest of the beneficiaries and must do so with reasonable care.
Under this claim the beneficiary may petition the court to instruct the trustee to make the distribution, or petition the court have the trustee removed from his or her position. If a judge agrees that a trustee should be removed from his or her position, he or she will appoint a replacement. The former trustee may also be ordered to pay monetary damages, legal fees, court costs, and other expenses.
There are other reasons under which a trustee may breach his or her fiduciary duty. Such reasons may be that he or she has:
- Embezzled or mishandled the trust assets;
- Engaged in self-dealing or another conflict of interest;
- Paid taxes late;
- Shown a preference for one beneficiary over another;
- Failed to provide a financial accounting of trust management; or
- Incurred avoidable expenses and fees.
Sometimes a trust lacks the assets to make a requested distribution. In such a case the trustee may need to provide an accounting report to the beneficiaries of the trust, either formally through the courts or informally.
Biddle Law Can Help
When you work so hard for all of your assets and want them to go to specific people and causes in a certain manner, you deserve to be able to do so. However, without a properly structured estate plan, including a correctly constructed trust, you can actually create detrimental circumstances for your loved ones, rather than help them. This is why it’s so important to consult with a knowledgeable and experienced California estate-planning attorney who knows the current laws and has experience creating different types of trusts and comprehensive estate plans.
At Biddle Law, we are here to answer all of your questions and walk you through the estate planning process. We care about your future and want to assist in protecting your interests. To learn more or to schedule a consultation, contact us today!