A trustee is a party who administers the assets of a trust and distributes them to beneficiaries in compliance with terms established by the trust grantor. Although the terms of a trust often allow a trustee considerable discretion with respect to the distribution of assets to beneficiaries, beneficiaries have legal options if the trustee's refusal to distribute trust assets appears to be unjustified.
A testamentary trust, unlike a living trust, is created by the terms of the trust grantor's will and does not take effect until after the grantor dies. Since the grantor is dead, the trust is automatically irrevocable, which normally means that a court order is required to revoke the trust. The trustee's authority, however, is not absolute; it's subject to the superior authority of the probate court and the fiduciary duties of loyalty and care imposed on all trustees by state law. For this reason, a trustee may not arbitrarily refuse to pay a beneficiary out of the assets of the decedent's estate.
Read More: Can I Have Both a Living Trust & a Testamentary Trust?
The trustee's fiduciary duties obligate him to manage trust assets with the same care a reasonable person would exercise in managing his own assets. He must also act with loyalty to the interests of the beneficiaries; for example, he may not profit from his management of trust assets, except to the extent that the probate court or terms of the trust allow him to receive reasonable compensation for performing his duties. Nevertheless, his duties also extend to trust creditors; he may not pay a beneficiary out of trust assets, even if payment is specifically authorized by the terms of the trust, until creditors are fully satisfied.
A trustee is obligated to provide beneficiaries with periodic accounting reports detailing his disposition of trust assets. If the trust is a testamentary trust, he must provide the probate court with a full accounting before the close of probate. If the trust continues after the close of probate, he must provide beneficiaries with accounting reports as frequently as state law demands. If mismanagement or other misconduct is suspected, a trust beneficiary may petition a court to compel the trustee to provide an accounting report at any time during the life of the trust.
Any mismanagement of trust assets, misconduct or unjustified withholding of trust assets that is discovered through accounting reports or independent investigation can be used as grounds to seek a court order to remove the trustee. However, if the trustee is vested with the discretion to withhold payments to beneficiaries, as in a spendthrift trust, courts are reluctant to remove a trustee absent clear evidence of an abuse of this discretion.
- Estate Street Partners, LLC: What is a Trust Protector?
- Law Office of Theodore J. Koban: The Fiduciary Duties of Executors and Trustees
- Lawyers.com: Modifying or Terminating a Trust
- Law Offices of Janet Brewer: Dealing With an Uncooperative or Dishonest Executor or Trustee
- State of California: Superior Court, County of Alameda: What If the Trustee Won't Tell Me What's Going On?
- Lawyers.com: Executors
- FreeAdvice: Is it Possible to Remove an Executor From an Estate?
- David W. Tate Attorney at Law: A Summary of California Trustee Responsibilities, Beneficiary Rights, and Elder Law Issues
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.