Now that you have trust information, how do you use it? What are some red flags that may represent improper trust activity? Our last post dealt with the ways to request trust information. This post examines some of the misdeeds revealed by the trust information you receive.
–Stolen trust assets. Sometimes there’s a fox in the henhouse. Trustees have the exclusive power to manage trust assets, and yes, they sometimes abuse this power by flagrantly stealing trust assets for themselves. However, given that the trustee is likely the person giving you trust information, they are unlikely to make their theft obvious. An experienced trust attorney can help you analyze the documents and information you received and investigate potential theft.
–Improper distributions. Every trust provides for the distribution of trust property. Sometimes, those terms aren’t strictly followed. For example, perhaps your stepmother is the primary beneficiary of a trust and is entitled to income like dividends, while you are a contingent beneficiary who will receive the trust property when your stepmother passes. You find out the trustee distributed not only income, but an entire parcel of trust land to your stepmother. In that scenario, the trustee made an improper distribution. Or perhaps you and your brother are the two beneficiaries of a trust. The trustee has been favoring your brother by distributing much more to him than to you. Depending on the terms of the trust, this could be another example of an improper distribution.
–Wasteful spending and improper expenses. Trustees are allowed to use trust funds to pay for certain trust-related business and expenses. But those powers can be quite limited. It’s highly unlikely that your trustee is allowed to spend trust money on the trustee’s first-class plane tickets and five-star hotels, even if your trustee was allowed to pay for travel expenses with trust funds. Or perhaps your trustee overpaid himself or herself with trust funds as compensation for trustee services. All of these examples may indicate unauthorized trust spending.
–Conflicts of interest. Generally, trustees cannot use trust funds for the benefit of themselves, personally. This is called a conflict of interest, and it covers more than the trustee simply taking funds. Perhaps the trustee withdrew trust funds by making a low-interest loan with the trust. Even if the trustee pays back the loan, this is still likely a conflict of interest. For another example, a bank trustee likely has a conflict of interest when it uses trust funds to purchase its own investment products for the trust.
–Improper care of trust property. Trustees are charged with the safekeeping of trust property. Your trust information may reveal a breach of this duty. For example, the trustee may neglect to purchase homeowner’s insurance for a rental property held by the trust. Or the trustee may deposit funds in an amount that exceeds the FDIC’s standard $250,000 insurance amount. The trust information you obtain may reveal these improprieties.
So now, with the benefit of trust information, you find that the trustee has been up to no good. What can you do about it? Our next post will discuss the options available when your trust information reveals improprieties.
At The Johnson Firm, we regularly help beneficiaries throughout Texas enforce their rights and get what they’re entitled to. Please call our Dallas lawyers if someone is denying your rights. Our offices also serve Plano, Frisco, McKinney, Denton, Fort Worth, Garland, Irving, Austin, Houston, San Antonio, Nacogdoches, Lufkin, and Center.