Something does not seem right with your father’s trust, or more like the trustee. Beneficiary distributions have been late or missed. Tax due notifications have arrived, and the trustee is now driving a luxury car.
A trustee has specific duties when managing a trust. When those duties fall by the wayside and the terms of the trust are no longer met, it is time to remove the trustee and take legal action. Maybe it is due to negligence and fraud or just plain incompetence.
Mismanagement and playing favorites
Here are some reasons to seek the removal of a trustee:
- Failing to distribute trust assets: This is one of the main tasks of a trustee. Neglecting to make these payments is a sign of breach of fiduciary duty.
- Playing favorites: Is the trustee showing signs of favoritism to a certain beneficiary by giving them more money?
- Mismanagement: Assets in a trust are to be administered by the trustee. They cannot dip into the trust, skimming funds off the top for personal gain.
- Conflicts of interest such as self-dealing: It is unethical to take advantage of the trustee position and act in his or her own interests rather than the interests of the estate. This is another example of breach of fiduciary duty.
- Poor record-keeping: Maintaining thorough records is a must in matters related to distributions, taxes, investments as well as gains and losses. Beneficiaries should regularly demand to see the records.
- Neglecting tax payments: Making late tax payments or failing to pay taxes are a no-no. The IRS will seek interest and enforce financial penalties. As a result, trust assets shrink.
Any of these situations should raise alarm. It is time to act and have the trustee replaced.
Getting the trust back on track
If trust in your trustee has eroded, you must remove the person and consider litigation. Like the beneficiaries, the trust’s creator would likely shudder on learning of such mismanagement. Do your best to overcome these problems and get the trust back on track.