Often, an inheritance is left to loved ones through a trust instead of as a direct gift in a Last Will and Testament. As the beneficiary of a trust, you must depend on the Trustee to manage the trust assets and administer the trust using the terms created by the Settlor (creator of the trust). You also must count on the Trustee to distribute the assets to you pursuant to the terms of the trust and/or the authorize distributions if the Trustee has discretionary authority with regard to distributions. What happens if the Trustee isn’t following the terms of the trust? An Illinois Quad City trust administration attorney at Nash, Nash, Bean & Ford, LLP explains what you can do as the beneficiary if a Trustee isn’t abiding by the trust terms.
The Trustee of a trust is appointed by the Settlor when the trust agreement is created. A Settlor may appoint anyone he/she wishes as the Trustee. Most Settlors also appoint a successor Trustee in the event that the Trustee cannot serve for any reason. A Trustee has a fiduciary duty to the beneficiaries of the trust. That means that the Trustee must treat the trust assets with more care and invest with more caution that he/she would with his/her own assets. In addition, a Trustee is legally required to follow all the terms of the trust agreement unless a term is impossible, illegal, or unconscionable.
Your Rights as a Beneficiary
The terms of the trust agreement will dictate many of the rights of the beneficiaries of the trust; however, other rights are rights conferred on a beneficiary by law. The Settlor of a trust has the ability to grant beneficiaries a variety of rights within the trust agreement. The trust terms, therefore, may specifically grant beneficiary rights with regard to removal of the Trustee. The Settlor may give the beneficiaries the ability to remove a Trustee if a majority of those beneficiaries vote to do so or may give a single beneficiary the right to remove a Trustee.
Sometimes, however, a trust agreement is silent on the issue of beneficiary rights. That does not mean that beneficiaries have no rights though. On the contrary, the law protects beneficiaries by giving them certain rights even if the trust agreement fails to provide specific rights. For example, as the beneficiary of a trust you have a:
- Right to distributions – if you are a current beneficiary, you have a right to receive any distributions due to you under the terms of the trust agreement.
- Right to communication/information – you have the right to be kept informed about trust business and to be able to communicate with the Trustee of the trust.
- Right to an accounting – you have the right to receive a full accounting showing things such as what assets the trust holds, how much interest has been earned by the trust, and what expenses have been paid by the trust.
- Right to petition a court to remove a Trustee or terminate a trust – even if the Settlor did not grant you the authority to remove a Trustee directly, you always have the right to petition a court for the Trustee’s removal. Of course, you will need to convince the court that removing the Trustee is in the best interest of the trust and of all the beneficiaries. Reasons, why a court might approve a petition to remove Trustee, include providing proof that the Trustee has done things such as:
- Mismanaged trust assets
- Engaged in self-dealing
- Failed to follow the trust terms
- Created a conflict of interest
- “Good cause” (this is the “catch-all” for reasons that do not fit neatly into any of the common categories)
If you are concerned that the Trustee of your trust is not abiding by the trust terms, look first to the trust agreement (which you have a right to a copy of as a beneficiary) to see if you have any specific authority to remove the Trustee. If the trust agreement is silent, consult with an experienced trust administration attorney about petitioning a court for removal of the Trustee.
Contact an Illinois Quad City Trust Administration Attorney
For additional information, please download our FREE estate planning worksheet. If you have questions or concerns regarding a Trustee who is not following the trust terms, contact the experienced trust administration attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.
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