Trust Accounting Litigation
Trustees must account for their actions in managing a Trust estate. This basic requirement of California law is so often ignored or abused by Trustees, with harmful (and sometimes devastating) results to Trust beneficiaries. If you are a Trustee, then an accounting is the perfect tool for you to (1) advise your beneficiaries of your actions, (2) seek their approval of those actions, and (3) have an orderly administration and distribution of the Trust assets without worrying about a lawsuit down the road.
When beneficiaries are kept in the dark about a Trustee’s actions, they usually assume the worst. And that’s for good reason because most Trustees who refuse to disclose information have something to hide. The actions of every fiduciary, whether acting as trustee, executor or conservator, are subject to the strictest scrutiny and their actions are constantly vulnerable to attacks by beneficiaries. Fiduciaries have a host of duties and liabilities that should govern their actions and they are held to the highest duty of care1 for every act they undertake (and every act they choose not to take).
Attacks against trustees
Whether you are a beneficiary trying to assert your rights and protect your beneficial interests or a Trustee trying to comply with your duties, an accounting is the starting point for determining if the Trustee acted appropriately. Once a proper Trust accounting is filed in Court, then the finances of the Trust can be disclosed, investigated, and ultimately decided upon by a Court of law as being either reasonable or not. Where a Trustee abuses his or her power, then the Court has the ability to issue a personal surcharge against the Trustee and hold him or her liable for the harms and losses caused by the Trustee’s actions (or lack of action). Where a Trustee acts appropriately, then the accounting can provide the beneficiary assurances that all is well with his or her beneficial interests.
Common allegations against fiduciaries in legal claims by beneficiaries include the following:
- Misappropriation of trust funds or assets
- Failure to pay valid debts or liabilities
- Using funds from the trust for personal benefit
- Fraudulent, improper, or inadequate accounting
- Failure to abide by the terms and directions of the trust
- Making imprudent investments or failing to invest funds at all
Once an accounting is filed with the Court, the Court has the power to decide the issues presented in both the accounting and any objections to the accounting and order the appropriate party to take whatever actions are required to “make things right,” (which usually takes place after a trial is conducted by the Court on the accounting issues).
Trustees should seek legal counsel
Probably more so than any other type of legal case, Trustees and beneficiaries must have expert representation in an accounting action. Fiduciaries have the burden of proof2 at trial to establish that their actions were fair and reasonable under the circumstances (unlike other types of cases in which a person contesting an action carries the burden of proof). With the heavy burden of acting as a fiduciary, every fiduciary needs knowledgeable counsel to act properly and ensure their chances of being attacked by a beneficiary are minimized.
Beneficiaries need expert representation to understand the accounting provided by the Trustee, determine if the accounting is accurate by conducting discovery (such as subpoenaing bank records and conducting depositions and written discovery against the Trustee and all relevant related parties), and ferret out the problems with the financial reporting. It takes a strong combination of legal knowledge and financial knowledge to first understand an accounting and then fight any discrepancies in court.
At Albertson & Davidson, LLP, our in-depth knowledge of trust and estate matters in California is essential to helping fiduciaries meet their legal obligations and helping beneficiaries fight for their rights. In our practice, we have both defended and attacked fiduciaries, allowing us to understand what fiduciaries should be doing and under what circumstances they can be successfully attacked.
Contact an experienced California trusts and estates lawyer
If you are a trustee, executor, or conservator, or beneficiary of a trust, will or conservatorship estate please do not hesitate to seek legal counsel from one of our experienced trusts and estates attorneys. Our offices are conveniently located throughout California, so please call Albertson & Davidson, LLP for help today.