3 reasons beneficiaries take legal action against trustees

On Behalf of | Jun 15, 2023 | Estate And Trust Litigation

The beneficiaries of a trust receive access to assets when their circumstances meet the rules put in place by the creator of the trust. In some scenarios, trust assets are only available for specific expenses, like educational costs. Other times, an individual’s personal circumstances must meet certain criteria as outlined in the trust paperwork.

A trustee has multiple responsibilities, including the management of trust assets and their distribution to beneficiaries in accordance with trust rules. Most trust beneficiaries can maintain an amicable relationship with the individual or professional managing a trust, but sometimes trusts end up embroiled in litigation. These are some of the reasons that beneficiaries choose to take legal action against the person managing a trust.

Incompetence or mismanagement of resources

Trusts sometimes contain complicated assets that require careful management. Making mistakes about how to invest those assets or failing to properly maintain them could lead to a drastic drop in the value of the trust and therefore the assets that the beneficiaries can access. In scenarios where a trustee’s action or inaction directly reduces the value of the trust and diminishes what beneficiaries can receive, they may be able to take legal action to replace that individual with someone better able to manage trust resources.

Embezzlement and other financial misconduct

Some trustees will find ways to personally profit from their role, possibly by stealing or embezzling assets. Others may use their position to enrich family members by hiring their child to serve as the trust’s accountant, for example. They may pay more than the market rate for those services, thereby enriching someone they know personally while increasing the cost of trust administration. When there is evidence of self-dealing, embezzlement and other inappropriate attempts to profit from the trustee’s role, beneficiaries may be able to challenge and remove someone from their position.

Violating trust documents or state law

Trustees must fulfill their obligations in accordance with Texas probate law. They also need to abide by the instructions set by the creator of the trust. Beneficiaries have proof that a trustee has done something illegal as part of trust administration or when they have deviated from trust instructions, they may have reason to pursue litigation. Refusing to distribute assets is a common reason for beneficiaries to take action against a trustee.

Although some people amicably resolve disputes related to trusts, others will need the probate courts to intervene and either guide the trustee’s behavior or replace them. Comparing a situation to common scenarios in which litigation occurs can help people evaluate the severity of a current trust-related conflict.