Can a trustee refuse payouts?

On Behalf of | Apr 24, 2024 | Trusts

Disputes can sometimes happen when a trustee doesn’t want to make payouts to the beneficiary of the trust. When the original person created that trust, they were able to pick both a trustee and a beneficiary, and the trustee is supposed to make distributions in accordance with the plan that has been left for them. Can they actually withhold or refuse these payouts?

They may be able to. After all, the trustee’s job is to “carry out the intent” of that trust. If the money that is being requested doesn’t appear to line up with the intent that the trust creator had, then the trustee is within their rights to step in and prevent that transaction. Often, trusts are used specifically to prevent frivolous purchases.

How could this happen?

One example of how this could happen is if someone sets up a trust to pay for a beneficiary’s college education. Maybe that person won’t be in college for years, but this money gives them a safety net and means that they can enjoy an education without having to go into overwhelming debt – as most students do.

But then the beneficiary requests a payment because they want to take a trip with some of their friends from college over the summer break. They argue that it is a college-related expense because that’s where they met their friends and they attend university together. But the trustee may realistically say that an international vacation wasn’t what the money was intended for and refuse the payout.

As noted above, though, this often leads to legal disputes over how money should be used and what rights the trustee has. Those involved in such disputes must know about their legal options.



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