A trustee is a fiduciary of the trust and its beneficiaries. The fiduciary standard requires that a trustee comply with the standards defined by the trust agreement. Above all else, the trustee must be loyal to the beneficiaries by not usurping the trust's opportunities for his own benefit or stealing the trust assets. Communication is also vital. The trustee must disclose all material facts regarding significant transactions and the management of the trust. The best way to determine if the trustee has stolen from the trust is to obtain an accounting and the financial records of the trust.
Read the trust agreement. The trust agreement is what defines the responsibilities of the trustee. It should clearly state when the trustee can spend the trust funds, how the trustee is to maintain the trust assets, and when the trustee is to make disbursements. The trust agreement should also define what documents the trustee should maintain and what information you have a right to review. The trust agreement can expand, limit or waive your right as a beneficiary to demand an accounting.
Read More: How to Add a Co-Trustee of Irrevocable Living Trust
Review your correspondence with the trustee to determine if you waived your right to request a report. To be a valid waiver, you must have prepared a document stating your intention to not require the trustee to report on the financial status of the trust. You can revoke this waiver by preparing a written document stating that you are reclaiming your right to receive an accounting about the status of the trust. You must give any revocation of the waiver to the trustee for it to take effect.
Determine when you last received a report on the trust’s financial status. If you requested and received a financial report within the past six months, you generally cannot compel the trustee to give you another report.
Request from the trustee all relevant documents, such as bank records and asset valuations, regarding the operation of the trust. This step is often required before you can petition a court. The request must be written and dated. Send the request to the trustee by certified mail to establish the date when the trustee received the request. Generally, the trustee has 60 days to provide you the necessary information.
Petition the appropriate court to compel the trustee to provide you with an accurate accounting of the trust’s financial status. Trusts are subject to state law, so the process for petitioning the court will vary based on where the trust is located. Generally, you will draft a document stating your desire to receive the financial information regarding the trust. You will file this petition with the court and receive a hearing date. You will be required to notify the trustee of the hearing so he may come and contest the petition. The court will review the petition and determine whether the trustee must transfer the financial information. Consider using a legal aid clinic or professional help to aid you in preparing the petition.
Determine how the money was spent using the financial documents. You will need to review every transaction to determine who received trust funds. Any evidence regarding transactions that appear to be outside of the trustee's authority as defined by the trust agreement may indicate that the trustee stole trust assets. In addition, any missing funds that are not explained by documentation may provide evidence of theft or poor fiscal management. This may be sufficient evidence to prove that the trustee is stealing. If the trustee is stealing, you can sue him for breach of fiduciary duty and recover any damages the trust might have sustained due to the theft.
If you wrongfully accuse a fiduciary, a court may require that you pay the litigation expenses of the trustee. You may also be required to compensate the trustee for other related expenses.
If you do determine that the trustee is stealing, consider obtaining professional help to assist you in any efforts to recover your losses.
- Mitchell & Associates: Fiduciary Duties of Trustees
- Living Trust Network: Types of Trusts
- LexisNexis Communities: Estate Practice & Elder Law Community: How to Compel an Accounting from a Reluctant Trustee – and How a Trustee May Defend
- Illinois Legal Aid: Preparing, Filing, and Presenting Motions in Court
- The Legal Practitioner: An Introduction to Corporate Regulation and Standardization
- Google Book: Business Torts Litigation