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Hi, this is Keith Davidson from Albertson & Davidson.

In this video, I’m discussing whether or not a Trustee can loan money to the Trust.

So, let’s say a Trust is short on cash.  It owns real property.  Maybe it owns some other illiquid asset, a business, and they need to pay some expenses.  And so the Trustee wants to loan the Trust money and get paid back at a later date.

The problem with any type of transaction between the Trustee and the Trust is it violates the Trustee’s duty to avoid conflicts of interest.

A Trustee has to remain neutral.  It cannot have a conflict with the Trust.  And any time the Trustee enters into any type of transaction with the Trust, it is, by definition, a violation of the Trustee’s conflict of interest duty.  It cannot do those type of transactions.

So that means that the Trustee would have to take an extra step if the Trustee wants to loan the Trust money – which is you either have to go to Court and get Court-approval or you’d have to fully disclose the transaction to the beneficiaries and get all of the beneficiaries’ consent.

So it is possible for a Trustee to loan money to the Trust, but the Trustee does need to be a little careful about how they do it, because, ultimately, if the Trustee wants to be paid back with interest, there’s going to be the potential that a beneficiary is going to say they charged too much interest or they didn’t structure the deal properly and fairly to the beneficiaries.

And so, in order to avoid those type of conflicts, the Trustee, number one, should just not loan money to the Trust.  Try to get a loan from some other source.  Or, number two, if that’s the only option available, then the Trustee really needs to be careful and make sure that everything is fully disclosed to the beneficiaries and that everybody has consented to it before following through on the transaction.

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Hi, this is Keith Davidson with Albertson & Davidson.  In this video, we’re discussing the trustee’s sale of assets.

If a trustee sells a trust asset, can you reverse that sale?  Can you bring the asset back into the trust?  And the answer, generally speaking, is no.  Typically when a trustee sells property, the beneficiaries will not be able to recover that property back to the trust.  And this is because most trust documents and the California Probate Code give the trustee the authority to sell assets.

Now there are some limitations.  For example, a trustee must sell the asset for a fair market value.  They have to act reasonably.  But even if the trustee sells an asset for less than fair market value, that doesn’t mean that the beneficiaries will be able to get the property back.  They might be able to get damages against the trustee for selling the asset too low, but it doesn’t necessarily mean the property will be coming back.

If the trustee was perpetrating some sort of fraud on the trust, and did a sale to a third party but it actually was a related party to the trustee, because it was part of the fraudulent scheme, then the beneficiaries may be able to recover an asset and bring it back into the trust.  It really just depends on the facts and circumstances.

But those types of cases happen very rarely.  Typically, a trustee is going to have the right to sell trust assets as long as they sell it for fair market value, they’re not going to get in trouble for selling trust assets.  And even if they do sell it for less than fair market value, it will be a damage claim against the trustee.  The trustee will have to pay money.  It won’t necessarily be a recovery of the asset and bringing it back into the trust.

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Hi, this is Stewart Albertson with Albertson & Davidson.  And I want to talk to you about bad trustees doing bad things to your interest in a trust.

We do many, many consults with clients where they come in and say, “I’m the beneficiary of a trust.  I have a right to these assets and the trustee is refusing to distribute those assets to me.  What am I to do?”

And what I will tell you what you shouldn’t do is write more than one letter.  Let’s be clear that letters don’t work, but you’ve got to have some writing to the trustee saying, “Hey, I have a right to this distribution under the trust terms, give me my trust distribution.”  If the trustee still ignores you, then, unfortunately, you’re going to have file a Petition with the Probate Court.  That is the best way to hold one of these trustees accountable or get them to act in a way that you want them to.

In this example, we would generally file a Petition for Instructions with the Probate Court asking the Probate Court to order the trustee to follow through with the trust terms and make the rightful distribution to the beneficiary.  So that is one way we hold these trustees accountable.

But, what happens if the trustee is not making this distribution because they’ve gone and used these assets themselves.  In other words, they have fraudulently taken these assets from the trust and used them in a manner that the trust does not permit.  Perhaps they’ve taken vacations, gone gambling, spent money on their expenses, and they’re not giving you the distribution you’re entitled to.

In that case, not only are you going to want to file the Petition for Instructions that orders them, the trustee, to make the distribution to you.  You’re going to want to go after that trustee for damages.  You’re going to want to surcharge that trustee.  You’re going to ask the Probate Court to give you damages, order damages against the trustee where they have to reach into their own pocket and pay back money to you for the damages caused to the trust.

Again, we’d only want to send one letter in these kind of cases just to set the record that we tried to work with the trustee.  If the trustee still won’t follow through with what you’re doing, file a Petition for Instructions to get the court to order them to follow through.  And if you find out during that process that the trustee has stolen assets, or misappropriated assets, you’re going to want the court, or ask the court to impose an Order for Sanctions against the trustee so that they have to pay back the damages they’ve done to the trust.

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Hi, this is Keith Davidson with Albertson & Davidson.  In this video, I want to discuss when you can sue for trust mismanagement.

If you believe that your trustee is mismanaging the trust assets, perhaps they’re not investing properly, perhaps they’re actually taking money or using money for their own benefit, you really need to take action as soon as possible to make sure that you can stop any harm from happening to the trust, or any further harm from happening to the trust.  But you do need to have at least some evidence or some facts to support your claim that there is trustee mismanagement.  So you usually start either by filing a Petition in the Probate Court and asking that the court hold the trustee accountable for whatever harm has occurred.  Or, if you’re not fully advised of all the harm, then you’re going to want to demand an accounting from the trustee.  Ask the trustee to account for their actions.  If the trustee refuses, then you go to court and you ask the court to order the trustee to account for his or her actions.

Once you have the accounting, then you can see what has occurred in the trust administration.  You can issue subpoenas or do discovery, and you can start gathering the facts and the evidence you need to see what the mismanagement was and what actions need to be taken to right that harm.

So if you’re a beneficiary and you suspect trust mismanagement, you really need to take action as quickly as possible to number one, be advised of what is happening.  What is the financial information that you need to know to see what’s going wrong?  And, number two, hold the trustee accountable for the harms and losses that they’ve caused to the trust estate.

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Hi, this is Stewart Albertson with Albertson & Davidson.  And I want to talk to you about how do you sue a trustee in California?  So, if there’s a trustee of your trust and the trustee has breached the terms of the trust; in other words, not following the terms of the trust, not making distributions to you as a rightful beneficiary.  What you can do is you can file a Petition in the Probate Court under Probate Code Section 17200.

Probate Code 17200 is the gateway to the Probate Court and it gives a litany of issues that you can bring to the Probate Court and ask it to help you as a beneficiary of the trust.

One of those things is to surcharge a trustee who’s done inappropriate actions, to remove a trustee who’s been inappropriate in the way that they’re administrating the trust.  So, ultimately, the short answer to this question is if you have a trustee who’s not following the terms of the trust, is being abusive to you as a beneficiary, is not standing up for your interest in the trust, is not making the trust property productive, is refusing to disclose information to you; any of the above, you should file a petition with the Probate Code under Probate Code Section 17200 and ask the Probate Court to step in and either admonish the trustee, remove the trustee, order the trustee to follow the terms of the trust.

Those are the things you can do to sue a trustee in California.

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Hi, this is Stewart Albertson with Albertson & Davidson.  The question is can a trustee be changed after the trust is irrevocable?  In other words, after mom and dad are passed on and the trustee’s accepted office, can you change out that trustee for another trustee?  And the answer is yes, you can, if the trust terms allow it.  In fact, most trust terms do allow the trustee to change from the original trustee to a successor trustee, if everyone is in agreement.  So as long as everyone is in agreement, you can change from one trustee to another.

Now, in practicality, most trustees don’t want to give up their office as trustee.  And in those cases, you’ll have to try to remove them, which is a much more difficult thing to do.

But for the purposes of this video, certainly, if a trustee, original trustee is ready to step down and it wants a successor trustee to take over, and the trust terms allow it, it’s perfectly acceptable.

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Hi, this is Stewart Albertson with Albertson & Davidson.  We do get the question from time to time can my brother who is the trustee of our parents’ trust, can he also be a beneficiary of the trust?  And the short answer is yes, there’s no problem with that.  In fact, most trustees are also beneficiaries of the trust.  Most parents will name one or more of their children to be the trustee and that trustee will also be a beneficiary.

This normally doesn’t cause too many problems, especially where there’s just liquid cash to distribute.  Because, let’s say there’s a trustee and two other beneficiaries, for a total of three beneficiaries including the trustee.  You would simply just take the liquid assets and distribute them, one-third each.  And that’s not a problem.

Where we see the problem happen is where the trustee, who is also a beneficiary, is the last one taking care of mom or dad before their death and they get a house, for instance, that comes out of the trust as their beneficial interest, and the other two kids get cash.

What we see in some of those cases, is the trustee taking the cash before mom and dad dies and fixing up the home, putting a lot of money and improvements in the home.  Well, that’s not fair, because they’re essentially using the other beneficiaries’ money.  The trustee is using the other beneficiaries’ money to improve the house that they’re ultimately going to receive.

So, while there’s nothing wrong with a brother or sister acting as trustee who’s also a beneficiary, we do want to make sure that they provide an accounting so we can see their actions as trustee, to make sure that they didn’t do anything to benefit themselves at the cost of the other trust beneficiaries.

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Hi, this is Keith Davidson from Albertson & Davidson.  In this video, I want to discuss the difference between a trustee and executor?  What’s the difference between those two different titles?  And both trustees and executors are fiduciaries.  And a fiduciary is somebody who’s put in charge of somebody else’s money.  And the trustee is a fiduciary over the trust and an executor is a fiduciary over a probate estate.  A trustee is named as the manager of the trust in the trust document.  Whereas an executor is named as the manager of the probate estate in a will.  If somebody dies without a will, then the person who’s appointed is called an administrator.  But it’s really the same thing.  They’re the person who’s managing the probate estate.

Now in a trust estate, that’s created typically during somebody’s lifetime, which is why it’s called the living trust, or in legal jargon, we call them inter vivos trust.  And whoever creates that trust is going to name the successor trustee who’s going to take over and manage those assets, make sure that everything’s handled properly, and ultimately distribute those assets out to the trust beneficiaries

With an executor, they’re named in a will.  And so after somebody dies, the executor has to go to the probate court and admit that will into the probate system, into probate process, which is really just a court process where the court oversees the management of the state.  And ultimately, the court oversees the distribution of that estate out to the beneficiaries of the will.

And so in many ways, an executor and a trustee serve the same function, they both manage and ultimately distribute the estates that they’re in charge of.  The only difference is that a trustee acts under a trust and can start acting once the prior trustee passes away or stops acting for any reason.  You don’t have to go to court for a successor trustee to act.  Whereas, for an executor, the only way that an executor can start acting is after you go to court and get the court permission to appoint the executor in that position

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Hi, this is Stewart Albertson with Albertson & Davidson.  And I want to talk to you about when you, as a beneficiary, should get your trust distribution under the trust.  We get beneficiaries asking us quite often, “Hey, Mom and Dad has passed away.  It’s been about a year.  When should I get my trust distribution?

Most trusts are the kind of trust that can be distributed generally within one year to eighteen months.  Rarely will a trustee or trust administration need to go further than two years.  So somewhere along the lines of one year to eighteen months, you should see a trust distribution.

You can also get a preliminary distribution which is a distribution that comes early on in a case.  Let’s say that there’s a three million dollar trust and we know the expenses of doing the trust administration are going to be well less than a hundred thousand dollars.  In that case, the trustee should make a preliminary distribution to the trust beneficiaries, finish up the trust administration, and then make a final trust distribution of whatever is left over.

There are some estates that are subject to the estate and gift tax.  And while that’s rare these days because the applicable exclusion amount is so high for estate taxes, if that’s the case, the ultimate distribution of that trust is probably going to be two years.  Because the trustee is going to wait for the IRS to review the estate tax return and get a closing letter back from the IRS.  But, again, that’s the minority of cases.

The majority of trusts can get a preliminary distribution maybe within several months after Mom and Dad’s deaths, and then ultimately it should be about one year to eighteen months to get the final distribution.

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Hi, this is Stewart Albertson with Albertson & Davidson.  I want to talk to you about trustee’s fees.  It’s an issue that comes up quite often and beneficiaries are concerned and want to know how much should a trustee be paid, when should they be paid, should they be paid at all?  And those are all very good questions.

The first question has to be should a trustee be paid?  If a trustee’s not following the terms of the trust, if the trustee refuses to communicate with you, if the trustee uses the trust assets as if they’re their own assets and not your assets that they’re taking care of, if the trustee refuses to make distributions to you.  Well, maybe we have a trustee that doesn’t deserve much of a trustee’s fee.  Maybe not any trustee’s fee.  So that’s the first question.

Second question.  Let’s say that we do have a trustee that’s deserving of being paid.  Are they a family member or is it a bank, a private fiduciary we call these, a professional fiduciary.  And there’s a little distinction there.  The private professional fiduciaries are going to get a little bit more than a family member whose being a trustee.  So if it’s a family member whose a trustee, generally you’re looking at anywhere between $30 and hour and $80 an hour, just depending on what county you’re in, the complexity of the trust, what is the background of the trustee.  If the trustee is a certified public accountant and they’re doing a bunch of accounting functions for the trust, the court may grant them a little bit more for fees.

But what we do see that’s wrong in our opinion is a family member who’s a trustee paying themselves as if they’re a private fiduciary, a private professional fiduciary.  Private professional fiduciaries generally take about 1% of the trust estate per year for their trustee’s fees.  And most courts will approve that request by that professional trustee.  But that doesn’t mean your family member who’s a trustee also gets to take 1% of the trust estate.

And we see, many times, family members who are trustees who are nonprofessionals, trying to take 1% in trustee’s fees.  That is inappropriate.  We think that most probate courts are going to require the trustee, in that case, to take an hourly fee somewhere between $30 an hour and $80 an hour; maybe $100 an hour if you really find somebody’s that’s qualified and they’re going to have to line item and keep a journal and keep track of all the hours that they’ve worked on the trust and in what capacity they were working in the trust.  Were they working for your benefit as a trust beneficiary, or were they working to protect themselves from liability down the road?  Those are two different analyses.  One would be appropriate for trustee’s fees, the other would not.