What is Trustee Mismanagement?
When someone wants to protect their assets and their estate to make sure that their loved ones are provided for in the event of incapacitation or death, they can put many potential options in place. For example, having a power of attorney is an important step. However, it doesn’t cover all the many possible issues that would need to be addressed when the owner of the assets is gone or unresponsive. That’s where a trust comes in.
A trust is the legal term for a situation in which the owner of assets transfers the management of those assets to another party to be handled on behalf of a third party. A trust could work in several ways, from parents arranging a trust for their minor child to aging adults preparing their special needs adult children, to middle-aged kids preparing for the possibility that their parents will need additional care if they cannot do it.
However, the primary risk of a trust is that the person chosen as the trustee could mismanage the assets. Whether intentional or due to incompetence, this situation can arise and has in many instances before. The good news is that the trustee is responsible for handling tasks competently and being held accountable for them. The bad news is that it can and does still happen in many ways. That’s when you need the help of a legal team like The Council Firm, PLLC, to help you fix the situation.
Are There Different Kinds of Trustee Mismanagement?
At its core, trustee mismanagement comes down to one thing: the trustee has been charged with executing the purpose of the trust, and they are not doing so. However, to know if someone is mismanaging, you need to know what potential types of mismanagement exist.
For instance, the most obvious mismanagement would be taking actions that either contradict the trust’s instructions or have been explicitly barred. In the case of a trust with more than one beneficiary, mismanagement could take the form of one of the beneficiaries receiving special treatment and favors over the others.
Other issues can be related to acting for the benefit of the trustee rather than the beneficiaries. For example, making purchases or decisions that benefit them financially instead of making the best decision for the beneficiaries. Another possibility is engaging in conflicts of interest, such as potentially investing trust money or assets in a business that the trustee owns. There are many other potential ways for a trustee to mismanage, but most of them boil down to a central issue: not acting in good faith with the task given to them. When this is the case, and it can be shown, then it is time to act and involve the courts.
How Can I Tell When a Trustee Is Mismanaging a Trust?
This is the most critical step of the process, and the reason is simple. If you cannot present compelling evidence to the court that there has been a pattern of mismanagement, then they have no reason to make any changes to the circumstances of the trust that were put into place by the creator. The court holds legal documents in high regard and is unlikely to make alterations unless proof can be presented.
That’s why three clear steps must be taken to find that information. First, you can make an official request for an accounting from the trustee. This comes in the form of financial records, which are a paper trail of all the actions that have been taken. Not only are you allowed to request this, but trustees are required to provide this when you request it.
Secondly, you should gather any evidence. As mentioned earlier, the most obvious proof is the accounting and financial records, but that is not the only evidence you can secure. Any communications that can be verified as coming from them could be applicable, such as text messages, voicemails, emails, and conversations for which there were third-party witnesses. By gathering and evaluating all of this, you can start to build a clear picture of the suspected mismanagement.
Third and finally, you should consult with an attorney. Not only will an attorney with experience in trusts and mismanagement be able to look at the evidence and accounting you provide to give you a measured evaluation, but they may also be able to tell you what else you should be looking for in terms of evidence. They can help you understand what kind of misconduct or mismanagement is occurring and your options to fix it.
A reasonable attorney will honestly appraise the situation and tell you what you can do about it. In some cases, they may say that the behavior you’ve noted may be unpleasant or disagreeable to you, but not something that breaks the trust guidelines. However, it’s also possible that they will see your evidence for what it is, evident mismanagement, and then it’s time to file a legal claim. That will give you the option of potentially removing the trustee, forcing distributions that have been mismanaged, or even ordering the repayment of funds that were misused.
Do I Need an Attorney for My Mismanaged Trust Case?
As with many aspects of the law in the United States, particularly in Texas, the court does not require you to hire an attorney to handle a mismanaged trustee situation. However, as you can see from the discussion in this article, the process is complicated and challenging to accomplish, which is why many people connect with an experienced attorney who knows all the details and steps.
With something as serious as the distribution of a loved one’s assets and their overall legacy, it’s risky to rely on information you find online or in videos, or even with the moderate assistance of the court itself. The loved one who set the trust in place had a goal and intention with their trust, and if the trustee is not living up to that expectation, it becomes your responsibility to fix it. Most of the time, the way to ensure that it is fixed is to work with someone who has done it before.
That’s why you should speak with our team at The Council Firm, PLLC. With years of legal experience and knowledge of the trustee process, we know how to navigate the paperwork and courtroom challenges that stump the average person dealing with these complicated legal matters. Call us at 903-494-3380 so we can hear your situation, help you come up with a strategy, and start the process of fixing your trust mismanagement issues.
