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Hi, this is Stewart Albertson with Albertson & Davidson. And we use this term abused trust beneficiary and we want to talk about what is an abuse trust beneficiary? We generally see two types of abused trust beneficiaries in our practice. We have those that we call vested trust beneficiaries and non-vested trust beneficiaries.
So let’s talk about the vested type first. In this case, a beneficiary of a trust has a right to say one million dollar from a trust and it’s in the trust document. Nobody disagrees that they have the right to that one million dollars. But, for whatever reason, the trustee refuses to make the distribution of the one million dollars to the beneficiary. Perhaps the trustee doesn’t believe the beneficiary will make wise choices with the money that is theirs under the trust. Or maybe the trustee wants to use that money for themselves as they go forward in the trust administration. Or maybe the trustee just wants to be in the power position and give a sibling of theirs a hard time that they had bad feelings for.
There’s many reasons why a trustee refuses to make distributions, but ultimately, if a beneficiary has a right to those distributions and they’re not being made, that is an abused trust beneficiary. That is somebody who has a right to money and someone else saying “No, I’m not going to give it to you and I have no legal right to stand on in not giving it to you. I’m just refusing to give it to you.”
In that case, you generally will have to get a lawyer involved. The lawyer will ask the trustee to make the distribution on your behalf. If the trustee refuses, unfortunately, you will have to file in the probate court and get the court to order a distribution of those assets.
So that’s the first type of abused trust beneficiary. The second type of abused trust beneficiary has to do with a non-bested beneficiary. This is someone who is/was a beneficiary of the trust in the past, but just before decedent passed away, someone comes along and gets that beneficiary taken out of the trust.
So same hypothetical. In 2015, a mom says I’m going to give my three million trust estate to my three children in equal shares. Meaning one of those children each get one million dollars each. In that case, if one of those beneficiaries is written out of the trust two weeks before mom dies, and their million dollars disappears under the new amendment to the trust. That is an abused trust beneficiary. If mom didn’t intend that, if exercise of undue influence was taken over mom in order to get her to do that, then that trust beneficiary will have to, more than likely, file a petition to invalidate the amendment that was created that removed them from them trust.
So those are generally the two categories of abused trust beneficiaries that we see in California. If you think you fall under one of these categories, more than likely, you’re going to need a lawyer’s help to understand your rights. And then, once you understand those rights, decide on how you want to move forward to protect the interest that you may have in a trust.