We spend a good deal of time and effort discussing the mistakes Trustee’s make in administering California Trust’s. From bad management, to problems investing assets, to misinformed or even bad Trustees. But not all the blame for ugly Trust administrations lies with Trustees. Beneficiaries can cause their share of problems too.
That’s what I call “Troubled Trust Administrations.” When a Trustee who wants to do the right thing runs into problems with wayward beneficiaries some action needs to be taken. But it may be something short of going to court and starting a Trust litigation case.
To be clear, during a Trust administration, the Trustee is in charge. It is the Trustee, and only the Trustee, who decides what to do and when to do it. This can be a problem when a bad Trustee fails to follow the rules. But it can also be a good thing when a good Trustee is in office and is properly handling the Trust affairs.
Beneficiaries need to know that they do have rights, but they don’t have legal authority over the Trust. That’s the Trustee’s job. And if the Trustee is following the Trust terms, and administering the assets according to California Trust law, then the Trustee should be allowed to do the work they were appointed to do. This includes things like, selling real property, investing assets, paying taxes, paying creditors, hiring professional advisors, making preliminary distributions and creating any additional sub-trusts that are reuqired under the Trust document.
And a Trustee has a reasonable timeframe in which to take these actions. Typically, a Trust administration can take from 3 to 18 months to complete, or sometimes even longer for complex Trust estates, depending on the amount and complexity of the Trust assets.
When a Trustee hits a roadblock, whether it be an outside issue, issues with a Trust asset, or issues with a beneficiary, then some action may be required. Hopefully, such action can be done outside of Court, but the Court process is available to a Trustee any time an issue cannot be resoovled through other means.
For example, under Probate Code Section 17200, Trustees have the ability to seek instructions from the Court. This process allows a Trustee to set forth the issues and gives the beneficiaries an opportunity to either consent to, or object to, the proposed actions of a Trustee. If the petition is granted, then the Trustee can take the action they asked to take without fear of being sued over it at a later date.
Further, communication between Trustees and beneficiaries is cirtically important to keep an administration on track. Communication can be hard to maintain in some cases, especially where the Trustee and the beneficiary (or beneficiaries) are hostile towards one another. But even when relations are strained, communication will go a long way towards keeping a Trust administration out of court and moving forward.