As much as you may think you can trust someone, you always want to be careful, especially when it comes to taking care of precious assets. When a trustee mismanages an account, it can be devastating. Based on the specific circumstance that took place when mismanaging the trust, there are various approaches that a beneficiary can take. We elaborate on them more in this blog.
How Can a Trustee Mismanage a Trust?
According to LawInfo, here are some common ways trusts are mismanaged by trustees:
- Using trust funds to make investments that were not permitted by the trustee’s powers of investment
- Taking bribes instead of acting solely in the best interest of the beneficiaries
- Distributing trust assets to non-beneficiaries, or to a beneficiary who is not entitled to the assets under the terms of the trust document
- Using trust funds for the trustee’s own personal advantage or gain
- Reaping financial benefits from trust funds without permission
- Making decisions based upon personal interests, instead of those of the beneficiaries.
- Failing to take action to protect the trust fund.
- Acting in the best interest of one or more of the beneficiaries but not in the best interest of the majority of the beneficiaries.
How Can I Find Out If a Trust Is Being Mismanaged?
Trustees are obligated to account to beneficiaries for their administration of the trust.
Beneficiaries are entitled to financial information showing how the trust fund has been managed. If the trustee refuses to provide this information, the beneficiary can take legal action to get the trustee to produce it.
Once the beneficiary has the information, they should then be able to determine whether there has been any mismanagement based on the numbers.
If the beneficiary is unsure whether full information has been provided, they may want the help of a forensic accountant to discover whether they have all the information and whether there has indeed been mismanagement.
What Should I Do Now?
You should take legal action if…
- The trust funds have been misappropriated, or distributed to non-beneficiaries
- The trustee has failed to provide the assets with care and make skillful decisions
- The trustee has made unauthorised investments
- The trustee has, without permission, profited from their position as trustee
Have more questions regarding your trust?
Marcia L. Campbell, CPA is committed to helping each client plan for the personal and financial decisions that need to be made for the future. Marcia’s team has a genuine interest in your well-being and a well-established list of services to help guide you through this process.
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