Trust Law Course 9 — Lesson 2: The Law – Failure to Diversify Trust Assets

[Music] Now let's listen to the approach that Stuart Albertson would take to fight for your inheritance okay so we've got two problems here the first is the trustee in this case Ben has refused to diversify the trust assets something the probate code requires that he do the second problem here is that Ben intentionally kept from Sam that Sam was supposed to be a co trustee with Ben helping to administer the trust as it goes forward in other words under this amendment I think Linda the set lor wanted Sam to have some power and authority and to be able to make decisions with Ben on how the trust should be administered so we get to our five options which is the best of the five options well let me start with the fourth option and that was to contest the amendment that is the worst idea you don't want to contest the amendment you don't need to contest the amendment in fact the amendment is what makes Sam a co trustee with Ben of the trust so we don't want to contest that if we can test it and there's a really solid no contest clause you we could have a position where Sam is disinherited from this rather large estate well what about removal accounting surcharge and resignation I think you've got to try the soft approach first and that would be sending a letter to Ben saying hey we know number one that you've failed to diversify these trust assets as required under the probate code and we know that you would withheld the information from Sam that he is a co trustee with you in this trust we're asking that you resign and appoint a nether or that we can appoint another fiduciary to take over another trustee that will work with Sam going forward on the trust this may or may not be successful but this would be the path of least resistance and it should be at least attempted if Ben says no I refuse to resign then I think Sam's in a position where he probably should file for removal accounting a surcharge the question is does Sam file for all of those at time.the one thought I would have here and it's not an option up here but I want to add it is I'm thinking about it now and that is maybe we simply want to confirm that Sam is in fact a co trustee of the trust with Ben once we could get a court to confirm that Sam is a co trustee then Sam has the ability to come in and get all of the records that Ben has had for however long since mom died and to go through all of the actions of bad to see how has ben been administering this trust if Ben had diversified this trust to begin with right after mom died there would have been a large pool of assets that could have been used to kickoff income to Sam every single year there also would have been adequate principal available to make distributions for Sam's health maintenance welfare and support so let's say that the monthly income that's kicked off to Sam isn't enough to pay for all of his medical doctors for his health insurance for his rent for his apartment for perhaps a school he's going to for tuition and books and those kind of things we can actually dip into the principle of the trust to pay for those items which is perfectly acceptable but the way that Ben has set this trust up he's set it up for himself essentially to be an employment function for him where he receives a management fee for running the apartment buildings and renting out the house and also receives a trustees fee for administrate the trust well that was not the purpose of the trust the trust was to benefit Sam so we want to make sure Sam is benefited so I think the first thing I would do is file alone a single cause of action and that is to have the probate court confirm Sam as a co trustee of the trust and then we'd be able to get all the information we need to determine if in fact Ben has breached the terms of the trust which we know he already has by failing to diversify but what about all the payments he's made to himself what about all the bad decisions he's made that have heard the the growth of the trust by investing in an apartment building that may not have been the best vehicle to invest in and also investing cash into the house which means a lot of upgrades before it could be rent now for a low amount in this case lower than two thousand dollars of rental value that the fair market value would call for once that's filed I think the probate court would confirm Sam we would get the access to information at that point you could file for removal you want Ben to account for all of his actions which you'll already have a lot of the documents anyway to show that you have been able to go to the bank as a code trustee of the trust and get all the bank statements so you can see all of the things that Ben has done during his tenure as trustee and then of course we want to surcharge we want to get damages money damages against Ben for the harms to the trust the the easiest one here would be for renting the house out for less than fair market value so we'd find out how long he should have been renting out the house it should have been an extra $2,000 a year in rent or $2,000 a month in rent you multiply that by the number of months he spent trustee and we asked him to reimburse the trust for that amount out of his own pocket we also want to look and see if his failure to diversify has limited the returns that the trust has with the old apartment building and the house that he had to put a lot of money into both to put in a position to be rented out which is severely constrained Sam's standard of living Sam is living on three thousand dollars a month and it is not easy to live on three thousand dollars a month for anybody especially with somebody in Sam's position but setting that aside Sam's mom set this trust up to make sure he could have a reasonable standard of living going forward and she wanted him to have input into that all things that have been taken away from him by Ben's decisions so in a nutshell I would file a send a letter first asking Sam to simply step down and turn everything over to Ben and a new trustee I mean to Sam at our new trustee and then I would file to have Sam confirmed as a code trustee of the trust which I think the probate court would do we get access to records and information determine what dan has been doing is trustee and if we see that Ben has breached the terms of the trust which we already see that he has my family diversify we a petition to have him removed as trustee we want him to account to Sam as now another Co trustee of the trust all of Ben's actions for his longest been has been a trustee and then for the damages that Ben has cost to the trust we want to get search hard to gets bad for those of us. [Music] [Applause] [Music]