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Representing Abused Living Trust Beneficiaries

California Living Trusts (also known as “Revocable” trusts) have become extremely popular in California, and have largely supplanted traditional wills as the main means for transferring an estate to the next generation.  Trusts are designed to “avoid probate” which essentially means that trusts are intended to operate without any supervision by a court.

Staying out of court is usually a good thing. Courts and lawyers cost money, after all. Trusts are designed to be controlled by one or more successor-trustees after the creator of the trust, the “trustor” or “trustors” has passed away. When designed and run properly, trusts can be an efficient and inexpensive way to manage the transfer of an estate. Unfortunately, things do not always work out that way.

There are many kinds of problems that can afflict trust situations. This article deals with the most common scenario – abuse of beneficiaries by the successor-trustee. There are countless variations on this theme, but many of these situations boil down to a common scenario in which a “lawyered up” successor-trustee, who is not under the supervision of any court, is managing the trust to his or her benefit to the detriment of the (other) trust beneficiaries.

1.  Trustees Using Trust Assets for Themselves. This is a common theme. Often a successor-trustee immediately occupies the former residence of the trustor. The trust requires that this property be sold and its proceeds distributed to the various beneficiaries. Successor-trustees may delay doing this for years, all the time living in the property rent-free and preventing other beneficiaries from receiving their share of the trust estate.

2.  Trustees Claiming Sole Ownership of Trust Assets. Sometimes a successor-trustee outright claims ownership of a trust asset. Sometimes it is ambiguous as to whether a bank account or other untitled asset (coin collection, gun collection, etc.) was intended to be a trust asset or was a “gift” to the trustee or his or her family. Not uncommonly the trustee will use trust moneys to hire legal counsel to represent the trustee’s position regarding the dispute. Beneficiaries, by contrast, often lack legal counsel altogether.

3.  Sky-High Trustee Fees. This is one of the most common abuses by successor-trustees. Since trusts normally are not under Court supervision, trustees usually hire legal counsel to advise them on trust administration matters including the amount of the trustee’s own “trustee fees.” Trusts are often vague on these amounts. Trustees often have an uncanny ability to hire lawyers who advise them that their trustee fees can be extremely high. This is an obvious conflict of interests that can rapidly deplete a trust if the beneficiaries fail to take action.

4.  High Legal Fees and Abusive Use of Lawyers by Trustees. California law and the trust document usually allows trustees to use trust moneys to pay for the trustee’s legal counsel. This may be reasonable – most successor-trustees do not have legal training and often need legal guidance on carrying out their fiduciary duties to the beneficiaries. Unfortunately, abuses are common. Often successor-trustees use trust money to hire lawyers to take legal positions adverse to the other trust beneficiaries. So you have a situation in which the trustee is funding litigation against the trust beneficiaries essentially using the beneficiaries’ own money to pay for his or her lawyer. Unfairness can go little further.

There are many other scenarios involving successor-trustees abusing trust beneficiaries. If you are in this kind of situation, Buffington Law Firm trust dispute attorneys have decades of experience in bringing cost-effective court action to correct the problem. You may call us with no obligation for a free legal consultation. All consultations are with an experienced trust litigation attorney and are completely confidential and protected by attorney-client privilege.