Trusts can sometimes lead to disputes when a trustee and a beneficiary disagree on how the money should be used. For example, perhaps the money was put into an educational trust. The beneficiary believes that buying a new computer is an educational cost, but the trustee believes that the account is supposed to be used for things like college tuition or buying books.
To get around this, people will sometimes use discretionary trusts. These don’t have as many rules, because the trustee is allowed to use their own discretion to decide how the money should be distributed and what it can be used for. But this too can lead to a dispute.
What did the trust’s creator actually want?
The problem is that the trustee is supposed to use their discretion to authorize payments for things that the person who created the trust would have approved. But there’s no guarantee that a trustee and a beneficiary are going to agree about these expenditures.
For instance, say that a beneficiary wants to use the money to start a business. The trustee believes that the money could be used in this fashion, but doesn’t necessarily believe in the beneficiary’s business idea. They view it as a waste of money and don’t want to authorize the payment.
But can they do that? Can they deny a payment just because they think it’s a bad idea? Where do they get to draw the line regarding what the trust’s original creator would have wanted? Or, even if the beneficiary doesn’t like it, does this trustee have full authority to make whatever decisions they want?
These disputes can often be very difficult to sort out and can lead to significant conflict. Those involved need to understand exactly what legal options they have.