Trustee Not Paying Beneficiary

By David Carnes

A trustee is a party who administers the assets of a trust and distributes them to beneficiaries in compliance with terms established by the trust grantor. Although the terms of a trust often allow a trustee considerable discretion with respect to the distribution of assets to beneficiaries, beneficiaries have legal options if the trustee's refusal to distribute trust assets appears to be unjustified.

Testamentary Trusts

A testamentary trust, unlike a living trust, is created by the terms of the trust grantor's will and does not take effect until after the grantor dies. Since the grantor is dead, the trust is automatically irrevocable, which normally means that a court order is required to revoke the trust. The trustee's authority, however, is not absolute; it's subject to the superior authority of the probate court and the fiduciary duties of loyalty and care imposed on all trustees by state law. For this reason, a trustee may not arbitrarily refuse to pay a beneficiary out of the assets of the decedent's estate.

Trustee Duties

The trustee's fiduciary duties obligate him to manage trust assets with the same care a reasonable person would exercise in managing his own assets. He must also act with loyalty to the interests of the beneficiaries; for example, he may not profit from his management of trust assets, except to the extent that the probate court or terms of the trust allow him to receive reasonable compensation for performing his duties. Nevertheless, his duties also extend to trust creditors; he may not pay a beneficiary out of trust assets, even if payment is specifically authorized by the terms of the trust, until creditors are fully satisfied.

Protect your loved ones. Start My Estate Plan

Accounting

A trustee is obligated to provide beneficiaries with periodic accounting reports detailing his disposition of trust assets. If the trust is a testamentary trust, he must provide the probate court with a full accounting before the close of probate. If the trust continues after the close of probate, he must provide beneficiaries with accounting reports as frequently as state law demands. If mismanagement or other misconduct is suspected, a trust beneficiary may petition a court to compel the trustee to provide an accounting report at any time during the life of the trust.

Trustee Removal

Any mismanagement of trust assets, misconduct or unjustified withholding of trust assets that is discovered through accounting reports or independent investigation can be used as grounds to seek a court order to remove the trustee. However, if the trustee is vested with the discretion to withhold payments to beneficiaries, as in a spendthrift trust, courts are reluctant to remove a trustee absent clear evidence of an abuse of this discretion.

Protect your loved ones. Start My Estate Plan
Responsibilities of a Trustee to a Beneficiary in Maryland
 

References

Related articles

How to Settle a Trust in Indiana

Keeping assets well away from probate court is the main idea of trusts. These legal structures allow a settlor to place investments and property under the management of a trustee. A trust also names beneficiaries who receive assets -- without the assistance of the court system -- when the settlor dies. This event begins settlement of the trust, which is the responsibility of the trustee.

Trustee Duties for a Revocable Trust After Death

When a grantor creates a revocable trust, he must appoint a trustee to manage or administer the trust. Trustees have fiduciary duties, meaning they must always administer the trust in the best interest of the beneficiaries and pursuant to the terms of the trust document. Moreover, if the trust doesn’t terminate upon the death of the grantor, the trustee continues to be responsible for these duties pursuant to the terms of the trust document.

The Duty of a California Trustee to the Account Beneficiaries

Trustees owe a great responsibility not only to the person who created the trust, but also to the beneficiaries of the trust. In the legal context, this responsibility is referred to as a “duty.” There are several different duties owed by the trustee to the beneficiaries. If the trustee breaches one or more of these duties, the trust beneficiaries may sue the trustee for any damage caused by the breach.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Rights of the Beneficiary of a Family Trust

A family trust is a trust in which the beneficiaries are family relations of the grantor. Since the assets of a ...

What Is a Contingent Trust Trustee?

A contingent trust, also known as a standby trust, is a trust that does not yet exist but will come into existence if ...

What Is the Power of a Trustee in a Testamentary Trust?

In a testamentary trust, the trustee's function is to serve as guardian and manager of trust assets. The trust document ...

What Can a Beneficiary Do If the Trustee Refuses to Deal?

The trustee of a trust is required to act as a legal fiduciary on behalf of trust beneficiaries. If the trustee refuses ...

Browse by category
Ready to Begin? GET STARTED