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The reasons to remove and sue a trustee

On Behalf of | Oct 22, 2021 | Estate Planning |

A trustee has important duties overseeing assets within a trust. Tasks include paying taxes, following the trust’s terms and providing regular distributions to beneficiaries.

However, sometimes, a trustee may neglect those and other duties, placing his or her interests above those of the trust. When this occurs, it is time to remove the trustee and pursue a lawsuit.

Embezzlement and conflict of interest

Here are some of the reasons that you may sue a trustee and have them removed:

  • Embezzling or mismanaging the assets: The trustee may be making personal investments with the money that he or she must be prudently administering.
  • Engaging in self-dealing and other conflicts of interest: This may occur if the trustee uses the money for a personal loan or transfers money to a disqualified person. It is a no-no to use the trust’s money to gain personal advantage.
  • Neglecting to provide accurate records on trust accounting: Maintaining thorough records are necessary regarding taxes, distributions to beneficiaries, investments made, along with gains and losses of the trust’s assets. Request records on a regular basis.
  • Making late tax payments: This is to the detriment of the trust. The IRS imposes interest and penalties on unpaid taxes and for failing to file them. This may be a sign of negligence or fraud.
  • Displaying preference among beneficiaries: Perhaps the trustee is doling out more money to a certain beneficiary than another.
  • Failing to distribute trust assets: This represents a breach of fiduciary duty and is a sign that deceitful behavior is taking place.

Great care likely occurred when the grantor – the person who created the trust – named the trustee. However, the grantor did not envision complications from a dishonest trustee.

Protecting the trust from mismanagement

A lawsuit may be your best option when dealing with a trustee’s mismanagement. The trust must be protected, and you, as a beneficiary can protect it from a dishonest and careless trustee.

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