3 trustee mistakes that could necessitate probate litigation

On Behalf of | Jun 12, 2024 | Estate And Trust Administration

A trustee takes responsibility for the management of a trust. That duty typically entails managing certain resources and potentially making distributions to pre-selected beneficiaries. The trustor who created the trusts likely chose specific people who should receive resources from the trust or proceeds when trust investments generate revenue.

The trustee who manages trust resources has a fiduciary duty to beneficiaries. They should seek to maintain or improve the value of trust resources to the best of their ability. They also need to uphold not only state law but also the terms outlined in the trust documents.

Sometimes, family members have to take legal action against a trustee because of how they handle trust administration. What scenarios might necessitate legal action in the Texas probate courts related to a trust?

Embezzlement from a trust

A trustee could theoretically misuse the resources that the trustor set aside for their beneficiaries. They could transfer resources or sell assets to themselves or their business for less than they are worth. Beneficiaries have a right to request an accounting or financial breakdown of trust resources and trustee activity once per year in Texas. Doing so can help identify when embezzlement may have occurred.

Blatant mismanagement of resources

Managing the resources that fund a trust is not necessarily easy. A trustee may have to physically inspect resources and take actual possession of them. They may need to make decisions about how to invest capital or when to sell certain resources. At all times, a trustee should prioritize acting in the best interests of beneficiaries. In scenarios where a trustee has made mistakes that have cost the trust a substantial amount of money, family members and beneficiaries may need to take legal action.

A sudden inability to fulfill one’s duty

Incompetence or corruption are not the only reasons that people may need to challenge or remove a trustee from their position. Sometimes, a previously diligent and ethical trustee has personal challenges that affect their job performance. A divorce or other family tragedy could affect someone’s availability and mental health to a point where they cannot fulfill their responsibilities. Medical challenges might render someone permanently incapable of fulfilling their responsibilities. Incarceration could also affect a trustee’s job performance. If someone becomes incapable of managing a trust, beneficiaries may need to act quickly to remove them and have a replacement appointed to ensure the preservation of trust resources.

Recognizing when trust litigation might be necessary can help people protect the resources that someone else has set aside for their financial comfort. The decision to take legal action is never an easy one, but it is sometimes necessary when a trustee doesn’t perform their duties properly.