One of the most common additions to a comprehensive estate plan is a trust. In fact, people frequently choose to use a trust instead of a Last Will and Testament to distribute the majority of their estate assets after they are gone. If you are a named beneficiary in a trust it means that you are entitled to benefit from the assets held in the trust. The Trustee of the trust is responsible for distributing those assets according to the terms of the trust as created by the Settlor (the person who established the trust). What can you do, however, if the Trustee fails to distribute those assets? The Lincolnshire trust attorneys at Hedeker Law, Ltd. explain what a beneficiary can do if the Trustee is unresponsive.
Trustee Duties and Responsibilities
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries as well as invests trust assets and administers the trust terms according to the terms created by the Settlor. The Trustee is in a fiduciary position, meaning that he/she must treat the trust assets with the utmost care. A Trustee is also legally obligated to follow the terms of the trust, as written by the Settlor, unless a term is illegal, impossible, or unconscionable. In short, if the trust terms require the Trustee to distribute assets to a beneficiary, the Trustee has a legal obligation to do so.
Why Might a Trustee Fail to Distribute Trust Assets?
Although there are an infinite number of reasons why a Trustee might fail to distribute assets as required by the trust, some common reasons include:
- The Trustee doesn’t understand the trust. Probably the most common reason for a Trustee’s failure to distribute assets is simply that the Trustee doesn’t understand the terms of the trust and/or the Trustee’s duties under the trust. This is often caused by a Settlor appointing the wrong person to the job of Trustee. Instead of appointing a professional who has a legal and/or financial background, a Settlor often appoints a spouse or family member who simply doesn’t have the ability to easily understand his/her obligations as Trustee.
- The Trustee is trying to cover wrongdoing. A more cynical reason for failing to distribute trust assets is to cover up wrongdoing on the part of the Trustee. If the Trustee has co-mingled funds, or embezzled assets, the reason for failing to distribute may be that there are no assets left to be distributed.
- The Trustee is just being lazy. Sometimes a Trustee is just plain lazy. If the Trustee is not a professional, he/she probably has a full-time job and/or family and may simply not have the time that is truly required to properly administer the trust.
What Can a Beneficiary Do?
As a beneficiary of a trust, you have a number of rights, including the right to receive distributions from the trust according to the trust terms. If the Trustee has failed or refused to abide by those terms you should always try contacting the Trustee, in writing, and requesting a distribution before taking more drastic action. If that does not spur the Trustee into action, you will likely need to pursue legal action by petitioning the appropriate probate court. A court can order the Trustee to make a distribution and order an accounting of trust assets if the court deems it necessary to ensure that no wrongdoing has occurred. Depending on the reason for the failure to distribute, and the results of the accounting, it may also be necessary to pursue removal of the Trustee to prevent further damage or loss of assets. If you find yourself forced to pursue legal action against a Trustee, consult with an experienced trust attorney right away to ensure that both your rights and the trust assets are protected.
Contact Lincolnshire Trust Administration Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about trust administration, contact an experienced Lincolnshire trust administration attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.