Trusts are one of the most important and versatile tools in estate planning. Not only do trusts allow one to pass on their property and financial accounts while avoiding probate, however, trusts also protect assets, reduce taxes on the assets, and can delay the distribution of assets to beneficiaries if desired.
Though trusts offer many benefits, trustees—the person appointed to look after and distribute the assets within a trust—can run into many problems when administering the trust. While certain trust administration issues can be entirely avoided or easily fixed, there are a few common issues trustees face when administering a trust that can occur even if a lawyer is involved in the process.
Problems Trustees Face When Administering a Trust
Below is a list of some of the most common issues trustees face when administering a trust.
Allegations of Mismanagement of Trust Funds
One of the most common issues trustees have to deal with include a beneficiary alleging that the trustee is not investing or managing the funds within the trust in the best interests of the beneficiaries. While common, this claim is typically a beneficiary simply making up this statement because they do not agree with how the trustee is performing their duties.
Disputes Regarding Authority
Another issue with trust occurs when the primary trustee dies and the secondary trustee takes over the account. If this occurs, a beneficiary may challenge the authority of the new trustee. Reviewing the trust documents can remedy this issue as the secondary trustee will be in the trust documents. However, if there are errors in the trust documents or if the language in the document is vague, the beneficiary may have a valid claim.
Demands for Distributions from the Trust
In most cases, the trust documents should state the conditions under which the distributions to the beneficiaries will be made. However, in many cases, a trustee has certain levels of discretion regarding asset distributions. If the trustee has discretion over distributing the assets, the beneficiary may not believe that the distributions are in the best interest of the trust or the beneficiaries.
Failure to Transfer Assets to the Trust
A trustee may think that they have the ability to administer certain assets. However, the creator of the trust must take legal steps to transfer assets into a trust. Thus, the trustee has no authority over assets that we never legally transferred into the account. To prevent these issues, a trustee must correctly identify a secure the assets within the trust. Furthermore, the trustee can seek court assistance if assets were not correctly placed into the trust.
Outdated Terms or Provisions
The most difficult issues that trustees encounter is when a trust contains terms or provisions that are outdated or void. To remedy these issues, the trustee may need to seek direction from a court before proceeding with the trust administration.
Deceased or Incapacitated Beneficiaries
Additionally, a trustee can have issues with the trust if a beneficiary to the trust dies or experiences incapacity. If the creator of the trust does not amend or address the beneficiary’s death, the trustee must seek direction from the court before proceeding with the trust administration.
Contests of the Trust
The beneficiaries or other individuals may contest that the creator of the trust had the capacity to create this trust. If this occurs, the trustee or beneficiaries may need to fight this claim in court. To fight this claim, the trustee or beneficiary must present evidence to the court. This evidence must show that the creator of the trust did have the capacity required to create a trust.
Trust and estate laws are complex, as the lawyers of Antonoplos & Associates Attorneys At Law can explain. This is so no matter the type of trust you decide to establish. As such, it is extremely important to have legal representation that can help you correctly set up your trust.