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Reasons Why a Trustee May Be Sued

Trustees are responsible for administering assets for a third party. In some instances, it is necessary to file a lawsuit against a trustee for various reasons, so trust litigation may be required to make sure that the trustee lives up to the terms of the trust; at the same time, if you are a trustee, know that you can be personally sued for your actions as a trustee as well as financially responsible for things that you may do wrong. In any event, you will need an estate planning litigation lawyer to protect you or advance your case during trust litigation.

Breach of Fiduciary Duty

A trustee is charged with acting as a fiduciary. This means that he or she has certain obligations in regard to the trust, such as the obligation to prudently manage its assets. In other words, this person must act in the best interests of the trust at all times. This requires the trustee to avoid conflicts of interest and refrain from entering into transactions that do not benefit the trust.

When a trustee breaches his or her fiduciary duty, he or she is liable to the beneficiaries of the trust. Trustees can be personally sued for their actions and mandated to pay for any economic losses that the beneficiaries have suffered. A trustee can be required to give a full accounting of how he or she has managed the trust’s assets and be ordered to pay if there was a breach.

An obvious example of a breach of fiduciary duty involves circumstances in which a trustee steals money from the trust. However, there are other actions that can constitute a breach of fiduciary duty, such as not providing beneficiaries with sufficient information about the trust and negligent management of the trust’s assets. Both sides in such a lawsuit will need an estate planning litigation lawyer.

Establishment of the Trust

There are numerous factors that can cause someone to challenge the establishment of the trust itself. One possible allegation is that there was some sort of fraud in the creation of the trust. Others may claim that the trustor did not have the legal capacity to set up the trust. One iteration of this argument is that the trustor had diminished capacity and, thus, was not able to validly sign the agreement that established the trust. Alternatively, someone may claim that the trustee had an undue influence on the trustor. In any event, the validity of the entire trust may be challenged by those who have a financial interest in its assets.

Distribution of Trust Assets

Some people may file a lawsuit in an attempt to force a distribution of assets from the trust. A trustee may either be slow to make a required distribution or refuse to do it at all. Depending on the terms of the trust and the requirements concerning distribution, a person may be able to file a lawsuit to force the distribution to be made. Sometimes, the trustee may simply not understand the trust and his or her obligations with respect to distributing its assets. If you are a beneficiary and believe that you are entitled to a distribution that you have not received, it is better to take action sooner rather than later, especially if you believe that the failure to distribute assets is because the trustee has taken the property.

Failure to Follow the Trust’s Terms

Trustees can also be held accountable if they do not follow the instructions set forth in the trust for various issues like management of property. They may be refusing to provide information to the beneficiaries as they are required. Alternatively, they may be failing to invest the money in accordance with the terms of the trust. In any event, the trustee can be held to account in a lawsuit.

Proven New Jersey Estate Litigation Attorneys

Contact the Knee Law Firm in Hackensack, NJ, at (201) 996-1200 when you need an estate planning litigation lawyer to handle a lawsuit relating to a trust. We can help you navigate through a complex process.

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