Missing Trustee

[bigsky9]

What is the name of your state (only U.S. law)? Arkansas

My mother passed away, leaving her assets in a revocable trust. The trust listed me and a sibling as the beneficiaries. The trustee has disappeared, I cannot reach her by phone or mail. No assets have been distributed. What should I do next?

 

[HomeGuru]

What is the name of your state (only U.S. law)? Arkansas

My mother passed away, leaving her assets in a revocable trust. The trust listed me and a sibling as the beneficiaries. The trustee has disappeared, I cannot reach her by phone or mail. No assets have been distributed. What should I do next?

**A: you need to see a trust/estate attorney.

 

[bigsky9]

Should the attorney be in my home state ( Montana ) or the state of the trust ( Arkansas) ?

Thanks much!

 

[Dandy Don]

Is the trustee a relative? You could hire a private investigator for a few hundred dollars to do a skip trace, but first consult with a trust attorney to determine if you even need to locate the trustee. If the trustee names a secondary trustee, then that could be the next person who handles it.

 

[tranquility]

Not without the resignation of the trustee. The trustee needs to be located or there needs to be a court order. (Absent a trust provision of a "trust protector", which is very rare in such a trust.)

I'd choose an attorney where the situs of the trust is.

 

[TrustUser]

do you have a copy of the trust ?

1) check to see how trustees are appointed. it is not uncommon for the beneficiary to have final say, which means the beneficiary can elect a trustee for any reason at any time.

2) look for a section that might be labeled "incapacitated or not competent". a well-written trust should include something about the trustee being absent without explanation, or in some way not able to act effectively.

 

[tranquility]

Once a trust is irrevocable, rarely can the beneficiary determine the trustee. There are many tax and other issues related to such. One the concept of the disappearance of the trust when the beneficiary has such power.

While trustuser seems to have knowledge and experience in such things, I do too. I do not find such a clause usual. I also know of many reasons, depending on the facts and goals of the grantor, why it is unusual.

This is a situation where I disagree with trustuser. (Not that that is a bizarre thing. ) Yet, I CAN envision circumstances where what he says to be true is, in fact true. But, I suspect not.

 

[TrustUser]

hi tq,

it is nice to have discussions with you without it being a war - LOL.

1) i am not sure why you would preface your sentence with "once the trust becomes irrevocable", since the beneficiary and trustee are typically the same while it is revocable.

but discussing irrevocable trusts,

2) i did not understand what you meant by saying the disappearance of the trust if a beneficiary has such power. i dont get the correlation. are you referring to the beneficiary spending everything in the trust ? or were you talking about the disappearance of the trust document ?

3) i would be happy to discuss tax and other issues if you have one that you would like to bring forth.

4) regarding the grantor - i think i can come up with more reasons why the grantor would want the beneficiary to have say-so over the trustee, than vice versa.

the grantor could have concerns about his kid's ability to make financial decisions himself, which is why he might have someone other than his kid (beneficiary) be the trustee.

but he might also realize that it is not a good idea to have someone else with complete say-so. after all, the property is owned by the beneficiary, since he is the beneficial owner of the trust.

when i talk to people, they very much like the idea of knowing that a trustee, who has no real ownership in the property, is able to be replaced by the owners, should the need arise.

3) i cant say for sure how "usual" the clause is. but i did say that it is not "uncommon". i realize that both usual and uncommon are somewhat general terms. so i simply suggested that the op at least look at those areas in the trust to discern what is what.

4) if i was a parent, i would choose to opt on the side of the fence of my child. i would rather him have too much power, than not enough. i would never want a trustee to have absolute power. to me, that just gives the trustee too much of a green light to steal.

5) if you recall, i tend to like trusts that hang on to the principal, and distribute the income to the benes. in this way, it sort of mimics a retirement plan, and provides the security of some income to the bene for his lifetime.

6) as you say, it would depend on the goals of the grantor. but i think most grantors would tend to side with their benes having some say-so. by making someone else the trustee, the grantor has already placed some limitations on what the bene can do. allowing the bene to at least replace one trustee with another seems like a fairly decent compromise ?

 

[TrustUser]

hi tq,

let me start out one discussion with this general comment about an issue.

A beneficiary-trustee’s power to make discretionary distributions to himself or herself as a trust beneficiary WITHOUT the limitation of an ascertainable standard constitutes a general power of appointment (“the prohibited power”). IRC sections 2041(b)(1)(A) and 2514(c)(1).

laws certainly can change. but my understanding is that the most amount of principal that a beneficiary can have access to is for support, health, maintenance and education. there is a formal guideline (ascertainable standard) for it. this comes into play especially in a/b trusts, as to how much access the surviving spouse has to the "family trust" before it is deemed to be her own property in her own estate. but i would guess that almost always the trustee of the family trust is the surviving grantor. does your experience coincide ?

if possible, i think it is even better to exclude any access to principal - then you never have a gray area.

in any case, i think the trustee-beneficiary topic is of interest, and would like to hear your comments about any of the issues that you have seen, and in what circumstances ?

the goal of the majority of grantors is to make sure that their beneficiaries reap the benefits from the trust assets. the issue of dealing with a non-beneficial trustee is a BIG ONE.

in fact, even with a beneficial trustee, when he is not the sole beneficiary.

the trustee's job is to administer the trust per the trust document, which generally means having the best intentions for the beneficiaries. unfortunately, human nature and human greed can creep up.

 

[tranquility]

If the beneficiary can remove the trustee at will, much case law holds the beneficiary has total control over the corpus of the trust. If the trust has any goal besides avoiding probate, such a power will cause problems and may very well defeat the trust's goals.

 

[TrustUser]

okay, let's say that the bene has total control over the corpus, since let's assume that he can place himself as trustee, as well.

but let's also assume that his control over the corpus is limited to what the trust document says, since that is also true. he can not legally take the money and spend it, any more than a corporate trustee could legally do, if it is contrary to the trust instructions.

obviously, avoiding probate is a major goal of all trusts.

can you give me an example of what other goal would be ?

would having the trust continue to exist and serve as a retirement plan be a goal that you think would cause problems ?

if so, could you please post a url that speaks of this ? i am always interested in updating my knowledge, if it is something that is part of my life.

from my research, as long as the trustee works within ascertainable standards, it should not be a problem.

 

[tranquility]

Who would have standing to sue on an improper distribution (not following the rules of the trust) but the beneficiary? If the beneficiary can change the trustee, he says, "give me money". The trustee says, "you don't have a valid reason under the trust." Beneficiary gets new trustee. Rinse and repeat.

Reasons other than probate?

* A/B Trusts
* Asset Protection Trusts
* By-Pass Trusts
* Credit Shelter Trusts
* Charitable Trusts
* Charitable Split-Interest Trusts
* Charitable Lead Trusts
* Charitable Remainder Trusts
* Charitable Remainder Annuity Trusts ("CRAT")
* Charitable Remainder Unitrusts ("CRUT")
* Charitable Remainder Unitrusts with Net Income Make-up Provisions ("NIMCRUT")
* Complex Trusts
* Constructive Trusts
* Crummey Trusts
* Dynasty Trusts
* Generation Skipping Trusts
* Grantor Trusts
* Grantor Retained Income Trusts ("GRIT")
* Life Insurance Trusts
* Qualified Personal Residence Trusts ("QPRT")
* Qualified Terminable Interest Property Trusts ("QTIP Trust")
* Resulting Trusts
* Revocable Trusts
* Simple Trusts
* Special Needs Trusts
* Spendthrift Trusts
* Testamentary Trusts
* Totten Trusts

(none from the list include intentionally defective trusts either)
Or go to Wikipedia and search for "trust law".

 

[TrustUser]

the beneficiary would still have to find someone willing to break the law, if he is asking the trustee to do something contrary to the trust document. but for discussion sake, i am even allowing the beneficiary to be the trustee, so he would not need to find anyone but himself, to break the law.

you mentioned a whole bunch of different types of trusts.

would you consider a revocable trust that becomes irrevocable and is not dissolved, but rather used as an income generating tool for its beneficiaries - a goal other than probate ?

from your listing of various other trusts, it sounds as though you would consider that to be a goal other than probate. i am getting back to your comment about it being a problem if the goal is something other than avoiding probate.

if so, could you provide a url that specifically states the problems that arise when the trustee is a beneficiary ? i would like to read what the problems are, and under what circumstances they occur ?

i have pointed out one - but that comes when the trustee is not held up to ascertainable standards.

 

[tranquility]

but for discussion sake, i am even allowing the beneficiary to be the trustee,

This is where the problem lies. When the legal and equitable owners are the same, we have to address the Doctrine of Merger. Merger is very dependent on the specific form of the trust and state law, but at common law the trust disappears. Some courts have said legal and equitable title Merge if the beneficiary has the power to appoint the trustee or change him at will. That is why the concept of trust protector has come into vogue. It is an attempt to circumvent this basic legal theory. The protector can hire or fire the trustee at will, and the beneficiary can hire or fire the protector. This has worked in some courts and not worked in others. So again, the facts and some state case-law specific research would need to be done.

 

[TrustUser]

thanks tq,

i have heard of the doctrine of merger. for me, it comes into play with owning real estate, and how one is protected.

which is why most professionals own property in a "title holding trust", with someone else as the trustee. very often it is an llc.

here is a quote from the wiki

In the law of trusts the term "doctrine of merger" refers to the fusing of legal and equitable title in the event the same person becomes both the sole trustee and the sole beneficiary of a trust. In such a case, the trust is sometimes deemed to have terminated (with the result that the beneficiary owns the trust property outright).

in this quote, it occurs when there is just a sole person as bene and trustee.

i will do some more reading on it. i will be the sole trustee when my mom dies, but my sisters and i will all be equal beneficiaries. and the trustee is held up to ascertainable standards.

in your opinion, would i have any problems in my specific situation ? because this is a very common situation, where one sibling is trustee, because said sibling is better suited, financially.