Understanding The Sources Of Tension Between Trustees And Beneficiaries
After a loved one passes away, the successor trustee of his or her trust steps in and begins the administration process. Trustees have a great deal of responsibility and many duties and obligations that must be fulfilled during this process. They must manage and protect the assets of the trust while looking out for the best interests of the beneficiaries. The successor trustee then begins what may be a long-term relationship with the beneficiaries of the trust.
An Overview of the Sources of Tension Between Trustees and Beneficiaries
- Beneficiaries often want to gain control over the assets as quickly as possible, while trustees may be concerned that the beneficiaries will spend the money unwisely if they receive too much too soon.
- When the person creating the trust chooses a successor trustee, this is done as a way of forming a sort of barrier between the inheritance and the beneficiary, rather than an outright distribution of the inheritance.
- Some trusts are drafted giving the trustee a great deal of discretion. This can increase the tension between trustees and beneficiaries because the beneficiaries are naturally going to interpret these provisions for their own benefit; whereas a trustee may have a different opinion. For example, the trust may allow the trustee to give money to a beneficiary to buy a car to get to and from school. The beneficiary may want to purchase an expensive luxury vehicle, whereas the trustee may feel that an older, more sensible car is appropriate.
- Trustees also often receive fees as compensation for the trust administration services that they provide. The amount of these fees is sometimes, but not always, dictated in the trust document. In other cases, state law offers guidance on fees. Regardless, beneficiaries may feel that the fees taken by the trustee are too steep. The trustee, however, may have a great deal of work to do with regard to the administration and therefore may feel justified by the amount taken.
- Similarly, some trustees may opt to have a financial advisor handle the investments of the trust. This advisor would likely charge a fee. The beneficiaries may feel that this is a waste of trust money, while the trustee may not feel qualified to properly handle investment decisions relating to trust assets.
- Another source of tension between trustees and beneficiaries can derive from a personal relationship between the two parties prior to the trust administration. People creating trusts often choose someone they know and trust to serve as successor trustee, rather than calling for a professional trustee to serve in this role. While the person creating the trust may have had an excellent relationship with this individual, it is also possible that the beneficiaries did not share that same type of relationship with the successor trustee. Past, unrelated issues can create tension between the parties during the trust administration process.
- Some trusts contain provisions that give the trustee flexibility in the event of changing circumstances. For example, the trustee may be able to withhold distributions to a beneficiary if he or she is undergoing a divorce, is party to a lawsuit, or is struggling with an addiction. While the beneficiary may still want access to the money, the trustee may feel that it is in the best interest of the beneficiary to withhold it until circumstances change.
Unfortunately, when tension exists between trustees and beneficiaries, litigation can sometimes be the end result. To learn more about what to expect during this process, we encourage you to check out our free guide, Winning the Inheritance Battle: The Ultimate Guide to California Trust and Probate Litigation.
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The Grossman Law Firm, APC · · (951) 523-8307