Trustees have a legal obligation to adhere to the terms of the trust and be accountable to its beneficiaries for their actions. This obligation, also called their fiduciary duty, is one of the most important legal tools at your disposal to hold them responsible.
This is a fundamental concept of trust law: the separation of legal and equitable title. In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries.
As previously mentioned, trustees generally cannot withhold money from a beneficiary for no reason or indefinitely. Similarly, trustees cannot withdraw money from a trust to benefit themselves, even if the trustee is also a beneficiary.
A trustee is appointed by the grantor in the trust document and is legally bound to manage the trust in accordance with the terms of the trust and always act in the best interests of the grantor and beneficiaries.
Likewise, beneficiaries have a right to petition the court to have the trustee removed if the trustee accepted their appointment but are acting improperly or negligently. They can do this with the help of a probate attorney.
Trustees have a fiduciary responsibility to the trust's beneficiary or beneficiaries. This means a trustee must act in the best interests of the beneficiaries to manage their assets.
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
Typically, a revocable trust with clear provisions for outright distribution might conclude within 12 to 18 months. However, in simpler cases, the process can take an average of 4 to 5 months without complications.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
Depending on the complexity of the case, it may cost anywhere from a few thousand dollars to $100,000 or more to dispute the terms of a trust.
In addition to following all directions in the trust document, the trustee is responsible for: Assuming legal responsibility for administration of the trust. Taking control of and protecting trust assets. Handling accounting responsibilities of the trust.
Under California law, beneficiaries can sue a trustee. The initial step is confirming the trustee's identity. Subsequently, one must prove a breach of duty.
In essence, while both roles are powerful within their domains, trustees often have more enduring and autonomous control over the assets they manage.
Being nominated as a Successor Trustee is not a binding contract. It's an invitation and request to step into an important role, but only if you choose to accept it. Even if you are named as a Successor Trustee without your knowledge, you can always refuse the role after the fact.
The grantor can set up the trust so the money is distributed directly to the beneficiaries free and clear of limitations. The trustee can transfer real estate to the beneficiary by having a new deed written up or selling the property and giving them the money, writing them a check or giving them cash.
Usually, revocable trusts with clear distribution terms should be settled and distributed within 12-18 months following the death of its creator (settlor).
For the inheritance process to begin, a will must be submitted to probate. The probate court reviews the will, authorizes an executor and legally transfers assets to beneficiaries as outlined. Before the transfer, the executor will settle any of the deceased's remaining debts.
Under California law, embezzling trust funds or property valued at $950 or less is a misdemeanor offense and is punishable by up to 6 months in county jail. If a trustee embezzles more than $950 from the trust, they can be charged with felony embezzlement, which carries a sentence of up to 3 years in jail.
Key Takeaways. Funds received from a trust are subject to different taxation rules than funds from ordinary investment accounts. Trust beneficiaries must pay taxes on income and other distributions from a trust. Trust beneficiaries don't have to pay taxes on principal from the trust's assets.
As a fiduciary, a trustee must protect the trust's investments and act in the best interests of the beneficiaries. They must prepare and maintain trust accounting records and prepare tax-related forms, providing this information to the beneficiaries at their request.
You and the other trustees can call a general meeting. Your governing document may allow your charity's members to either ask you to call a general meeting, or to call such a meeting themselves.
Some circumstances can prompt a visit. You are obligated to provide the court with a clear and accurate financial picture of your assets during bankruptcy. A trustee may visit your home if they received information that you failed to list assets, devalued assets, tried to hide them or even reduced a property's value.
In order for the beneficiary to hold the trustee accountable, the beneficiary must have information about what the trustee is required to do and what the trustee actually does. Thus, the trustee has a duty to account and to inform.