Signs of trustee abuse in estate planning

When it comes to estate planning and trusts, a trustee must subscribe to duties of care and loyalty always looking out for the assets within the trust and its beneficiaries. A trustee must avoid acts that would prove harmful to beneficiaries while not promoting his or her own financial interests over that of the trust.

An extreme example of such abuse would be if a trustee goes on a gambling bender at casinos or horse races using money from the trust. When you name a trustee to oversee your assets, you want to make sure you make the right choice after careful consideration. But, sometimes, even the ideal choice turns out to be a person who breaches his or her fiduciary responsibilities. There are a few signs that point to trustee abuse.

Conflict of interests, commingling assets

Here are some common signs of abuse made by a trustee:

  • Lack of distribution or minimal distribution: Maybe the trustee does not understand the distribution requirements. That is plain ignorance. However, if a trustee is improperly withholding distributions that is a definite sign of abuse.
  • Sloppy record-keeping: A trustee must keep careful records of distributions, the money entering the trust, investments and certain transactions. If a trustee does not promptly provide you with these records when you ask for them, your suspicions should be on high alert.
  • Conflict of interest: A trustee must subscribe to the best interests of the trust, not his or her own interests. It is not unheard of in that a trustee has dipped into the trust to make shopping sprees, personal investments or hiring someone to do home improvement projects.
  • The commingling of assets: Whoa! A trustee’s personal assets should not be anywhere near the assets within a trust. These assets must always be kept separate. It is a sign that something is not right when a trustee commingles his or her assets with those from the trust.

In situations of trustee abuse, you may take legal action. You also should remove that person from the important trustee duties. You want someone you can trust, not someone who plans to take advantage of the trust.