There’s Trusts that run smoothly, there’s Trusts that have a few problems, and then there’s Trust where everything is a fight from start to finish. Which Trust sounds most like yours?
- Smooth Sailing. This is the way Trusts are supposed to work. The successor Trustee takes over management of the Trust, the assets are collected and inventoried, assets are sold as needed, bills are paid, beneficiaries receive their fair share, and the Trusteereports his actions with an accounting. If there is a continuing Trust for a beneficiary, then the assets are properly invested using a financial planner and an investor policy statement to be sure investments are appropriate. And the Trust administration is complete, without Court intervention.
- Houston we have a problem. The troubled trust administration is where a Trust has a few problems along the way, but nothing serious enough to force anyone into Court. Maybe the Trustee needs a gentle reminder on what to do. Maybe a beneficiary is being unreasonable, or a piece of Trust property is particularly hard to sell. Whatever the problem, a few arguments back and forth, some slight corrections, and the Trust administration is back on track. All’s well that ends well.
- All-out Warfare. This is where a Trust administration goes completely off-the-rails. A bad Trustee who refuses to follow the Trust terms, refuses to communicate and refuses to make mandated Trust distributions. Or Trust investments that are not planned out and are not appropriate for the Trust, or a Trustee who fails to account. Any one of these scenarios can end up with the whole mess in Court, for a judge to decide.
Notice something about the last approach? All the examples involve Trustee misconduct because the Trustee is the ONLY person who owes duties to the beneficiaries. The beneficiaries, in turn, owe no duties to the Trustee.
Unfortunately, even though the Trustee’s duties are well outlined in the California Probate Code, when a Trustee fails or refuses to follow the rules, only a Court can make them behave. There is no action a beneficiary can take, besides making demands, to force a Trustee’s hand other than seeking a Court order. Once in Court, the judge can issue an order and force the Trustee to act. Or the judge can remove the trustee, personally fine the Trustee, or any number of other actions to force compliance with the California Probate Code.
If you find yourself a beneficiary of Trust scenario number 3, you had better be prepared to fight for your rights.
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