What Laws Protect A Trust From A Trustee?
As a trust beneficiary, you may feel that you are at the mercy of the trustee. After all, you have no real way to force a trustee to act in your best interest or to stop them from mismanaging the trust funds. However, you may be happy to know that there are certain legal protections that can help prevent a trustee from doing things that are bad for the beneficiaries.
Right To Payment
The trustee of an irrevocable trust must comply with the terms of the trust document. This means distributing money to the beneficiaries, following investment strategies and paying trust administrative expenses. In some jurisdictions, a trustee may exercise discretion over distributions, but a discretionary clause does not protect the trust assets from creditor seizure. The anti-alienation or spendthrift provision in a trust instrument is the most important protection from creditor claims.
Right To information
If you are a beneficiary of a trust, you have a right to information about the trust and its assets. This right can help you ensure that the trustee is acting properly. This can include information about the settlor’s wishes, how the trust is being managed and whether the trustee has made any mistakes. The law says that the trustee must respond to your requests for material and that you have a legal right to challenge their accountings in court. If you find that the trustee is not acting properly, it’s worth contacting a solicitor who can advise you on your rights and options. This can include bringing a claim to remove the trustee, surcharge them or replace them with another person.
Right To An accounting
The right to an accounting is one of the most important rights beneficiaries have in a trust. It is a right to receive information that will help them understand their trust and take action when necessary. Beneficiaries are entitled to receive an accounting from their trustees at least once a year, and upon termination of the trust or change in trustees. If a beneficiary does not get a complete accounting, they can petition the court to order one. The accounting must include a full list of the assets and liabilities of the trust, and all income and distributions made. It should also include receipts, expenditures, bank statements and other pertinent information.
Right To Remove The Trustee
There is often a right to remove the trustee from a trust, especially when a conflict of interest arises. The right of removal may be spelled out in the trust instrument and is sometimes enshrined in the will as well. The trustee is a fiduciary, held to the highest standard of trustworthiness and whose primary responsibility is to act in the best interests of the beneficiaries. It is essential that a trustee never display open avowed hostility to any beneficiary or engage in conduct that is antagonistic to their interests. In determining whether to remove the trustee, courts look at a number of factors. Generally, however, the court must determine whether a trustee’s actions are inconsistent with the material purposes of the trust.
Right To End The Trust
If the settlor and all of the current and remainder beneficiaries agree, they can petition the court to end or change the trust. In some states, this can happen when the interests of the current and remainder beneficiaries are seriously affected by the termination. In other cases, a court can terminate or modify a trust if it is impossible or impractical to keep the trust going. The court can also terminate or modify a trust when it is not serving the purposes of the grantor, such as when it causes unreasonably large expenses to be incurred. For example, a trustee may be able to obtain court permission to terminate or modify a trust if the cost of administering it exceeds its value.