Trustee's Liability

[JMP OK]

IL.

What is the Trustee's liability to the beneficiary(s)?
Can a trustee be sued for loss of value?

Brief outline of situation.

My grandfather past away several years ago leaving behind a two companies and some real property, which were all put into a trust. The trustee of the trust is a bank. Upon assuming the role of trustee, they had appraisals prepared on all assets and the business. Today, the value of the trust is less than half of its original value. Within the first year as trustee the trustee hired an individual to run the business. This person had no previous experience running a company. The trustee is paying them two to three times the salary paid to others in this industry. This trustee is also responsible for my grandmothers (she is still alive but incompetent) trust and he has yet to inventory all her assets. These are only two examples.

 

[loku]

Trustee liability

The trustee owes a duty of care and loyalty to the trust and its beneficiaries. If the trustee is negligent or incompetent in handling the affairs of the trust, the trustee could be liable for any loss it causes the trust, or for loss of profits. If a significant amount is involved, it might be worth while to have an attorney look at the data and evaluate the bank’s liability.

 

[advisor10]

JUNE 2, 2001

DEAR JMP:

(1) Are you a beneficiary of the trust or just an interested observer with no connection to the trust?

(2) What type of trust is this? Do you have access to the trust documents?

(3) Please explain: Are you dissatisfied with the person who is running the business or with the trustee bank that selected this person?

Trustee has a legal duty to follow the instructions of the trust and to act in a PRUDENT (CONSERVATIVE) manner at all times for the benefit of the trust beneficiaries, so if excessive compensation has occurred, it does appear that you have grounds for action.

If trustee abuses his fiduciary duties, then he/she could be held legally liable, and can be sued individually. However, that process is complicated, expensive and time-consuming.

Instead, maybe you should focus on filing a motion or asking that the trustee be replaced with a more competent individual (usually called the SUCCESSOR TRUSTEE who may have already been chosen in advance by your grandmother), or that the salary (of the person who is running the business) be decided by an arbitration/mediation panel, or that the person be replaced.

SINCERELY,

[email protected]