The Perils of Being a Trustee

Trust between two people is something pure and priceless. It means that each one assumes that the other does not have ulterior motives. Whoever said that money is the root of all evil must have been thinking of trust law. People place their money in a trust because they want it to fly under the radar. The motivations and workings of trusts are more like the economy of cryptocurrency than they are like public displays of generosity. When an individual places some of his or her property in a trust, that individual, known in trust law as a grantor, is no longer the legal owner of the property. Instead, the trust is the legal owner. If it is an irrevocable trust, then the property in it does not even show up on the grantor’s tax returns. The grantor no longer gets to decide what happens to the money. Instead, the document that the grantor wrote when establishing the trust, known as a trust instrument, calls the shots. It designates the trustee, the person who has access to the money, and the beneficiaries, the people to whom the trustee must pay the money. If things go wrong, the trustee and beneficiaries can bring their disputes to court. If a relative has named you as trustee of a trust, and you need help avoiding mistakes that could lead to legal trouble, contact a Washington, D.C. estate planning lawyer.

Invest at Your Own Risk?

Some trusts simply own a savings account from which the trustee dispenses money to the beneficiaries until the money runs out. In other cases, the trust owns various types of assets, so the trustee’s duties are more complex. For example, the trust might own real estate properties or shares of stock, and the trust may indicate that the trustee should sell them when appropriate. The trust instrument might also instruct the trustee to invest money from the trust’s accounts in more lucrative assets.

The trustee is a fiduciary, which means that he or she has a legal duty to act in the best interests of the trust and its beneficiaries. When it comes to selling assets or investing funds from the trust, the trustee must apply the prudent investor standard.

Litigation Between Beneficiaries and Trustees

The beneficiaries may sue the trustee if they believe that the trustee is not acting in the best interests of the trust and is instead making financial decisions to enrich himself or herself. This might include anything from refusing a reasonable offer from a buyer who wants to buy a real estate property belonging to the trust to the trustee paying himself or herself an unreasonably large salary. If the court rules against the trustee in a breach of trust lawsuit, the court can order the trustee to pay damages to the beneficiaries or the trust out of the trustee’s own personal assets.

Contact Tobin O’Connor Concino P.C. About Trust Disputes

A Washington, D.C. estate planning attorney can help you fulfill your fiduciary duty as the trustee of a trust.  Contact Tobin O’Connor Concino P.C.  in Washington, D.C. or call 202-362-5900.

Source:

law.justia.com/codes/maryland/estates-and-trusts/title-14-5/subtitle-9/section-14-5-908/