Mismanagement of trust

[Jfdns]

California here.

My parents passed away when I was in high school leaving a decent sized savings in a trust to be managed by Uncle until I reach the age of 30, or sooner at his discretion. The trust documents direct him to use the funds solely for my benefit, to provide me with the full dividends received yearly and provide monthly accounting to me. I am now 25 years old and have not received a dividend payout once, though it is possible they have been reinvested into my trust. I also have never received a full accounting despite multiple requests. I don't like to think there is anything fishy going on here but between these issues and some smaller inconsistencies I am becoming worried.

I don't want to rush into a legal battle without determining if I'm being taken advantage of or if my Uncle is just profoundly lazy. My question here, to simplify it from 50 into 1, is how do I begin to investigate this account?

 

[anteater]

Sequentially... Or skip ahead if desired...

1) Make a written request.

2) Make a written demand.

3) Retain an attorney to make a written demand.

4) Take uncle to court.


A monthly accounting is a bit much. But, if that is what the trust document says, then it is what it says.

 

[Dandy Don]

Yes, a beneficiary can request a copy of the trust but the request must be in writing and not verbal. It would be better if you ask your attorney to write the letter to the trustee on your behalf, as the trustee is more likely to respond to an attorney's request. Trustee might tend to ignore the request if it came from just you. You also have the right to ask for an accounting statement for every year that the trust has been in existence.

Your attorney can evaluate all of the evidence (the trust document itself, along with tax returns and bank statements and accounting statements, etc.) to determine whether you would need to take action against the trustee. In the meantime, please be as cordial and nice to the trustee as you can be.

 

[LdiJ]

Yes, a beneficiary can request a copy of the trust but the request must be in writing and not verbal. It would be better if you ask your attorney to write the letter to the trustee on your behalf, as the trustee is more likely to respond to an attorney's request. Trustee might tend to ignore the request if it came from just you. You also have the right to ask for an accounting statement for every year that the trust has been in existence.

Your attorney can evaluate all of the evidence (the trust document itself, along with tax returns and bank statements and accounting statements, etc.) to determine whether you would need to take action against the trustee. In the meantime, please be as cordial and nice to the trustee as you can be.

Also, please note that most of the time dividends are not actually paid out. They do tend to be reinvested. Depending on the type of account that holds the funds it could be a somewhat complex process to get dividends paid out rather than reinvested.

Its also possible that the money is invested in things that produce very little in the way of actual dividends.

 

[Trustholder]

There are many ways to divide trusts into categories. One way is between a simple and a complex trust. A simple trust has to distribute all annual income to the beneficiary. Dividends would be a part of that income. The corpus of the trust cannot be distributed and all income is taxed to the beneficiary. A complex trust is almost the reverse. Income is maintained in the trust and the corpus is what can be distributed.

Do you get a K-1 from the trust each year? Did you have income you had to pay taxes on?

If so, you probably should have gotten a distribution of the dividends. I like the order anteater used of progressive actions. I would like to add another up front and take the trust to your attorney or to the trustee and ask him to explain how it is supposed to be handled. There are some books out there that might help too.

 

[LdiJ]

There are many ways to divide trusts into categories. One way is between a simple and a complex trust. A simple trust has to distribute all annual income to the beneficiary. Dividends would be a part of that income. The corpus of the trust cannot be distributed and all income is taxed to the beneficiary. A complex trust is almost the reverse. Income is maintained in the trust and the corpus is what can be distributed.

Do you get a K-1 from the trust each year? Did you have income you had to pay taxes on?

If so, you probably should have gotten a distribution of the dividends. I like the order anteater used of progressive actions. I would like to add another up front and take the trust to your attorney or to the trustee and ask him to explain how it is supposed to be handled. There are some books out there that might help too.

While I agree with all of this I have to say that there are many different kinds of investments that might be included in a brokerage account, and sometimes they do not really produce any dividends. They might produce interest income instead, or they might produce growth primarily through the buying and selling of stocks.

The OP might get better information by asking to see the end of the year reports from the brokerage or brokerages to get a better idea of what kind of income the trust is producing, if any.

 

[Trustholder]

While I agree with all of this I have to say that there are many different kinds of investments that might be included in a brokerage account, and sometimes they do not really produce any dividends. They might produce interest income instead, or they might produce growth primarily through the buying and selling of stocks.

The OP might get better information by asking to see the end of the year reports from the brokerage or brokerages to get a better idea of what kind of income the trust is producing, if any.

In the complex/simple trust division, capital gains are a part of the corpus and not "income". Seeing brokerage information would be useful. "Interest" would not be a part of the corpus and would be income. It should be treated the same way dividends should be treated absent specific trust provisions that would make the simple/complex division not very useful.

 

[LdiJ]

In the complex/simple trust division, capital gains are a part of the corpus and not "income". Seeing brokerage information would be useful. "Interest" would not be a part of the corpus and would be income. It should be treated the same way dividends should be treated absent specific trust provisions that would make the simple/complex division not very useful.

Except that the OP stated that the trust document specifically stated "dividends" would be distributed to him. We also do not know what vehicles the uncle may have used for investment. If the uncle parked it all in CDS or a savings account (hopefully that did not happen) there would be no dividends and not much interest either. If the uncle put it in REITS (hopefully he did not do THAT either) again, no dividends.

 

[Trustholder]

Except that the OP stated that the trust document specifically stated "dividends" would be distributed to him. We also do not know what vehicles the uncle may have used for investment. If the uncle parked it all in CDS or a savings account (hopefully that did not happen) there would be no dividends and not much interest either. If the uncle put it in REITS (hopefully he did not do THAT either) again, no dividends.

Which makes me think it is a simple trust and why I posted in the first place. Such income would have to be distributed. If the uncle put it in a REITS, be better have an enormously awesome explanation as to how such an investment is not only fiduciarilly sound, but also accomplishes the stated purpose of the trust. Discrimination between income and corpus beneficiaries through investment strategy is often litigated when the beneficiaries are different. Where the beneficiary of both is the same, I have not heard of as much litigation. But, based on discrimination case result reasonings, a beneficiary who wanted at least some of his money now for things that would not fall under ascertainable standards, might have a good argument if the investment mix was tilted too much towards corpus or income.

 

[LdiJ]

Which makes me think it is a simple trust and why I posted in the first place. Such income would have to be distributed. If the uncle put it in a REITS, be better have an enormously awesome explanation as to how such an investment is not only fiduciarilly sound, but also accomplishes the stated purpose of the trust. Discrimination between income and corpus beneficiaries through investment strategy is often litigated when the beneficiaries are different. Where the beneficiary of both is the same, I have not heard of as much litigation. But, based on discrimination case result reasonings, a beneficiary who wanted at least some of his money now for things that would not fall under ascertainable standards, might have a good argument if the investment mix was tilted too much towards corpus or income.

I do not disagree with you at all, but all of this doesn't entirely address the OP's concerns, and that is what I was attempting to point out.

There are multiple possibilities.

 

[Trustholder]

Yes. While I have not found what I wanted to ask here, it always depends on the facts. That is the thing that most impresses me based on my experience; little things can really matter. Really, little things.