Trusts are a common estate planning tool used by families who want greater control over asset distribution than a will typically provides. But once the grantor who initially creates the trust has passed away, someone must be responsible for administering the trust in their absence.
That person is called the trustee. Accepting the role of a trustee carries significant responsibility, including the legal obligation to act in the best interest of the trust’s beneficiaries.
However, when a trustee fails to meet their duties, a trust litigation attorney may need to get involved.
If you or someone you care about believes that they have been a victim of trustee misconduct, knowing what trustee responsibilities actually are and when legal action may be necessary is essential.
What Exactly is Trustee Misconduct?
Serving as a trustee isn’t a favor to the grantor. The Illinois Trust Code makes it clear that the position includes real legal obligations.
Above all, trustees are expected to act solely in the best interest of the trust’s beneficiaries. Whether there is a single beneficiary or many, the management of the estate and its assets should always be handled with the benefit of all beneficiaries in mind.
This is known as the fiduciary duty of a trustee.
When a trustee acts in their own self-interest, neglects their duties, or refuses to provide an accounting of the estate’s finances, it can be an example of improper administration.
Trustees are often family members or close friends of the trust grantor. In a majority of cases, they handle their responsibilities appropriately and misconduct is not an issue.
But when a trustee willingly makes decisions that clearly benefit themselves over beneficiaries, or outright acts against the instructions left in the trust, that can constitute a breach of fiduciary duty by the trustee.
However, many trustees are taking on this responsibility for the first time. It’s important to recognize that sometimes a trustee can make an honest mistake, or they may be neglectful of their duties, but not necessarily malicious. These are important distinctions to make and can be the difference between resolving an issue amicably and involving a trust litigation attorney.
The Legal Duties of a Trustee in Illinois
Under the Illinois Trust Code, trustees have several specific responsibilities.
Duty of Loyalty
The first duty of a trustee is to act solely in the interest of the trust and its beneficiaries. That means they cannot use trust money for their own personal expenses or to pay their own debts or bills. Nor can they loan themselves trust funds, or transfer trust property or assets to themselves.
Duty of Impartiality
Trustees are also expected to treat all beneficiaries fairly, without favoring any one over another. When a trustee makes distributions to other beneficiaries, but leaves out one, it can be considered a breach of trustee responsibilities.
Duty to Administer the Trust Properly
A trust leaves specific instructions for how assets are to be distributed, and may leave other instructions as well. Trustees are generally expected to follow the instructions laid out in the trust. If a family home is to be sold, they must oversee the process in a timely manner, and not improperly delay that or any other administrative duties.
Duty to Inform
Illinois laws make it clear that trustees are required to provide an accounting of trust assets along with any other trust-related information requested by the beneficiaries. If a trustee refuses to provide financial records or hides activity, it can be a sign of trustee misconduct.
Duty to Manage Assets Prudently
Trustees are expected to manage the assets of a trust with reasonable care and caution. It doesn’t mean that investments can’t lose money, they can. But the core issue is whether a trustee managed them in a responsible way, or if they managed assets recklessly. For example, if they let a property deteriorate, or if they failed to pay taxes or insurance, it could be considered a case of trustee mismanagement.
Common Trustee Misconduct Examples
Trustee misconduct can take many forms. Below are some of the most common types, along with practical examples.
Self-Dealing
This type of misconduct happens when a trustee makes a decision to use trust funds specifically for their own benefit, or transfers assets to themselves.
If a trustee intentionally sells a trust-owned property to a friend at a below-market value and keeps a portion of the sale price for themselves, it could be considered self-dealing.
Concealing Information
When a trustee intentionally withholds financial records or refuses to provide an accounting of what assets have been sold or how funds were distributed, it is considered a violation of their duties.
A good example would be a beneficiary repeatedly requesting bank statements and being ignored by the trustee.
Favoring a Beneficiary Over Another
A trustee who makes multiple distributions to one beneficiary before making distributions to others can be an example of improper administration.
Another example could be distributing a vehicle to one beneficiary without notifying the others.
Theft
If a trustee takes assets from the trust, such as artworks, jewelry, or other valuables that were not specifically left to them, that is a breach of the trustee’s fiduciary duties.
Similarly, using trust funds to pay off their own personal debts when they were not entitled to the funds would also be considered theft.
Failure to Follow the Trust
Most trusts leave specific instructions for the trustee regarding distribution of assets. If the trust requires a property to be sold, but the trustee occupies the home themselves, then the trustee has neglected their duty.
Excessive Delay
Many beneficiaries assume that it will take some time to manage the trust, but excessive delays can be a sign of misconduct. If months have gone by or even years without an effective explanation from the trustee, a trust litigation attorney may be needed to spur action.
When Does Trustee Mismanagement Become a Legal Issue?
When families are already processing the death of a loved one, the last thing they want to do is get involved in a legal dispute over how the trust is being managed.
However, there are definitely signals to look for that suggest retaining a trust litigation attorney may become necessary.
- Trustee does not follow the trust document’s instructions
- Trustee ignores or refuses requests for an accounting of trust assets
- Trust assets have disappeared without proper explanation
- Conflicts between beneficiaries are escalating instead of being resolved
- Beneficiaries suspect financial misconduct
Issues like these are not a normal part of trust administration. If a trustee refuses to cooperate or hold the standards expected of them, litigation may become necessary to hold them accountable under Illinois trust law.
How a Trust Litigation Attorney Can Help Your Situation
Should you find yourself questioning the conduct of a trustee, a trust litigation attorney or trust dispute lawyer can guide you through your options and represent your family if needed.
Most attorneys begin by reviewing the trust documents and instructions, and comparing them to the trustee’s actual conduct.
If after the attorney review it becomes clear that the trustee is not meeting their legal duties or is actively involved in self-dealing, the attorney can send a formal demand letter requesting that the trustee voluntarily step down.
However, in Chicago/Cook County and generally in Illinois, a trustee cannot be forced to step down without being ordered by the probate court. If the trustee agrees to step down voluntarily, great. If they refuse, then court intervention may be necessary.
Trust dispute lawyers can apply pressure to the trustee in several ways. They can demand a full accounting of the financials, present evidence they’ve found of self-dealing or trustee mismanagement, and cite any formal violations of the Illinois Trust Code.
When presented with substantial evidence of their wrongdoing, the trustee may decide to voluntarily step down rather than risk litigation.
If they still refuse, then court intervention becomes necessary. A court can compel the trustee to provide accountings, repay funds that have been taken, or freeze assets until another trustee is appointed.
To be clear, taking the issue to court should be a last resort. A court will not remove a trustee simply because the beneficiaries do not like them, or are not satisfied with their distributions. There needs to be sufficient evidence of trustee mismanagement or misconduct for a court to issue any remedy or remove them and appoint a new trustee.
Experienced trust litigation attorneys will know when the evidence is strong enough to have a trustee removed.
Staza Law: Chicago Area Trust Dispute Lawyers
Accepting the position of trustee comes with real legal responsibilities. They are expected to act solely in the best interest of the trust and its beneficiaries. When it becomes apparent that the trustee is not meeting their legal responsibilities, a trust dispute lawyer can help protect the rights of beneficiaries.
If you suspect a trustee of breaching their fiduciary obligations, it should not be ignored. Involving an attorney early on provides the legal guidance needed to preserve trust assets and even family relationships before it’s too late.
Staza Law helps Chicago area families through matters of probate, trust, and estate law, including trustee misconduct. Our team can help you understand whether or not a trustee’s actions are appropriate or if there is a real possibility that misconduct has occurred.
Contact Staza Law today to speak with one of our trust litigation attorneys. We can get to know your situation and advise you on the best path forward.