Trust Law Course 9 — Lesson 3: The Talk – Failure to Diversify Trust Assets

[Music] Now let's listen to Stuart and Keith discuss the options and their recommended approach to this difficult problem alright so Keith I threw a little bit of a curveball in here because we had as our options to remove the trustee to get the trustee Bend here to account maybe we want a surcharge him do we want to file a trust contest which I thought was a nice little thing to analyze or do we see if we can get Ben to simply resign the curve ball I threw in was a little bit more of a specialist and now a specialized way of analyzing this and that is hey if if Sam is named as a Cote rista under the amendment let's go to the probate court and get him confirmed as Co trustee and that gives us access to information and gives us the ability to go after bed now what are your thoughts on that option it's it's interesting curve ball and it wasn't something that we had on the options but the thing that I like about it is so often when we're talking about these cases what we're talking about is trying to get people's money out of trust right we don't always talk about other types of rights that are could be equally as important and that is being a coach rusty that's a right there's there's power that comes with that it's a power position and normally it in most cases it wouldn't be worth trying to fight to become coach rusty necessarily but in this case it very well could be worth it I mean this is a large estate you have somebody who's not getting information and and more important than that they're not being involved in the decisions so I think if you go to court and say hey this guy is supposed to be involved in the decisions and by being a coach rusty he can do that it's a really interesting opening move and you know a lot of this stuff you've said before the practicing law is more art than science I mean there's no right answer here but I like the option I like the idea of trying to get him into the power position and then once he's there having access and now we can go on to some of the other options that we did mention such as trustee removal removing the other trustee let me ask you if you were been in this case and you had attorneys that were filing to have sam brought on his trustee and let's just say you know you had done some things that were inappropriate and wrong how are you feeling about that petition not good I mean I do not want if I were Ben and Ben's shoes I do not want Sam to be co-trustee because if I had if Ben wanted Sam to be co-trustee he would have told Sam that your co-trustee I mean why did he hide it from him for so long obviously it's because he didn't want to act in that position and I don't know why maybe he thought that Sam didn't have the ability to act maybe he thinks that he doesn't have the financial means I don't know what it is maybe it's just controlling but I seriously doubt that Ben likes that development well and then let's assume that Ben hasn't done anything wrong here at least not anything wrong from his standpoint he feels like he's been a reasonable trustee we run into these cases where trustees make the trust essentially their employment going forward here you've got Ben not only receiving an annual trustees fee but he's also getting money to manage the trust assets so who just if the Trust hangs onto those assets who is that benefiting is that benefiting the ultimate beneficiary Sam or is that benefiting the trustee Ben yeah I think Ben's getting a lot from it so this becomes Ben's pension right his retirement pension and it can go on for as long as Ben lets it go on and the really I think despicable part of this particular case is that Ben is is kind of abusing Sam in a sense that Sam could be living so much of a better life and he's not and and that's just that's the part that that really gets me about this case okay and obviously we change facts up in cases that we do on video but we had a similar case in the past Oh a few years back where this this hypothetical we drew from some of the facts there you know when I first heard that case I didn't believe it to be true just because it just blew blew my mind but in fact it was as bad as we assumed may be what are some of the things that we learn from that case what made us better lawyers and representing our clients going forward I mean I think we learn a lot from all of our cases not only is this hypothetical representative of a case that we handled it's representative of probably hundreds of cases that we've handled there's all the elements of a lot of different cases in this one particular fact but the thing that's so interesting about it is number one these things happen I mean that's it is hard to believe like how could a trustee like Ben who's a CPA how can he take this position and be so unreasonable with the way he's treating Sam I don't know but it happens and the thing that you have to do is you have to take action so that puts Sam and the responsibility of having to take action and Sam's powerless he has no money he's not getting any distributions he's not getting access to information it's not like Ben's gonna hire a lawyer for say I'm using the trust money so Sam is truly powerless in this situation and that's really where I think we can do the most good is helping people who are being absolutely disrespected and just humiliated I mean Sam's a beneficiary of what eight million dollars and he's being treated like this I mean that's despicable and that's really where I think we can do our best work is being able to help people like that what lesson did you get from this case well not all the time do we get to represent people we like and in several of our cases that run down this this hypothetical we've had the the pleasure and privilege really--it representing some very fine people people that we cared about and we accrue to love may be a strong word but we thought of them as family members and we were very upset about the fact that they were being abused and they were being mistreated by this trustee I mean here Ben clearly knows that he knew that the Sam is a co trustee of this trust and he intentionally hides that from him and clearly mom she wanted Sam to have some guidance some help in running the assets that's why she did the amendment right she wanted to make sure there was some guidance but she wanted him involved in that decision-making and here you've got Ben who's using this trust really as his like you say pension plan his retirement and you've got poor Sam who's maybe not in the best of health he doesn't need an apartment building with a bunch of improvements made to it they get paid off over 30 years he needs a standard of living now and that's more than $3,000 a month so what I got out of this was helping people who were in a position where somebody in power a trustee was taken advantage their power hurting that person and we were able to help them are our clients ultimately get rid of that person get them out of the picture and get a good trustee and some of the carers and wants to do a good job for Sam as his mother intended and so that usually kind of cases where you walk away from feeling good like you've done something good for somebody so if you can only do one thing in a case like this let's say that you know you have your option of either removing Ben as trustee going for a surcharge against been for his damages or seeking somehow to get a distribution out of this trust whether it's terminating the trials or getting a large distribution into Sam's hands what is the top priority in your mind among those choices it's tough because the facts and circumstances of each case will dictate where we're gonna go on that obviously if we find that Ben is a good human being a decent person a moral person that just happened to make some really bad decisions but not intentionally well maybe surcharge isn't going to be all that important as you know many judges are going to search on somebody they have to kind of not like them and if Ben is actually a good person a decent human being and he's just made some incorrect decisions based on bad information or lack of studying what his requirements were as trustee in that kind of a case we're probably not going to come out to search art but we certainly want to say okay in that type of a case Ben you've made some mistakes here it wasn't intentional we want to get a real professional and we're willing to waive any surcharge we have against you and and bring somebody else on then is probably gonna take you up on that offer it removes Ben from the picture brings in a new fiduciary a new trustee that knows what they're doing and they're gonna diversify the assets as the Probate Code requires they're gonna sell the assets have a pool of cash there that's gonna kickoff income hopefully that income is enough for CM to live on but if it isn't there is that principle that you can come on and take a little bit from from time to time to make sure the Sam has a standard of living that his mother intended him to have and it seems to me that priority number one too has to be get the money out of Ben's hands and so if I can accomplish that through a removal then that's what we should do if we can accomplish that through getting a distribution out of the trust or Turman of the trust then let's do that whatever we can do to get the money out of Ben's hands I think is priority number one so I would agree with you that surcharge is a little bit more dicey a little bit more difficult because it depends on the facts it depends on if the person was just negligent or or reckless depends on what the Trust says some trust actually relieved the trustee of liability and then you've got the probate code that says the judge can always give the trustee and out if they choose to which is a little strange but that's what the probate code says so surcharge yes if you can get it but priority one has to be get the money out of Ben's hands I agree with that. 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