Who’s King of Your Trust? Can Trustees make decisions without consulting the beneficiaries?

Trustees have a surprising amount of power over your Trust assets. In this video we discuss what Trustees can do, and more importantly, what they should do when managing your Trust assets.

The following is a verbatim video transcript:

I find that there’s a lot of confusion out there about what the powers of a trustee are. So when somebody’s trustee, they have the right to make all of the decisions. They are what we call the legal owner as separated out from the beneficiary owner. So the beneficiaries are the beneficial owner. They’re going to get the benefits of the assets. But the trustee is the legal owner in the sense in that they get to make the decisions. And a lot of times, beneficiaries will say, “Well, the trustee has decided to sell the home that’s in the trust and they never talked to me about it and I’m not part of that decision.” Well, technically, you don’t have to be part of that decision. And, technically, the trustee doesn’t have to talk to you about it. They have the right to put the property up for sale without ever mentioning it to you at all. And that might seem like a strange concept, because, in most of our minds, we would think well if I’m a beneficiary of this home, I should have a say as to whether or not it gets sold and at what price, because I’m a part owner. But you’re not really a part owner, not in the legal sense. You’re only a part owner in terms of the benefits that come off of that sale. But that doesn’t mean that you shouldn’t have some input in that. And I’ll tell you the trustee who chooses to sell a home without getting any input from the beneficiaries is playing a very dangerous game. Because that trustee is ultimately is probably going to have beneficiaries who object to their actions later on and that trustee can be sued if they sell the home at a price that’s not appropriate or to a person who they shouldn’t be selling the property to. Because maybe it’s an “inside” deal or it’s not an arm’s length transaction.

So any trustee who thinks well, I’m just going to do what I want is playing a dangerous game. The better approach is for a trustee to be inclusive. Give information to the beneficiaries. Let the beneficiaries have input. Have a discussion about ok, I’m going to sell the house and this is what I’m thinking of listing it out, you know. And, now, if the beneficiaries disagree or two beneficiaries can’t get along, ok, fine, then the trustee may have to just make a decision and get on with it. But at least the trustees should approach the beneficiaries and attempt to get their input because it does a number of things. First of all, you’ll probably stop a dispute in the future because the beneficiaries at least had a say in this. They were informed. They’re not surprised that all of a sudden something’s being sold at a value they didn’t understand. And, secondly, it could be that the beneficiaries have useful information and a lot of times a trustee don’t understand that. A trustee might think well, I’m in charge, I’m going to do what I want. But maybe one of the beneficiaries has lived in that same neighborhood where the home is for many years, or they understand the market, or they’re in real estate. Who knows? Sometimes different viewpoints can be very helpful when it comes to trying to decide what to do with trust assets.

So there’s a benefit to getting input. And there’s really no downside, because even if beneficiaries disagree, the trustee ultimately can make the call and just say ok, I’ve heard from both beneficiaries. You guys aren’t in agreement. So I’m just going to do, you know, one thing and this is what I think we should do.

But keep in mind that as a beneficiary, you don’t have a right to give input. You don’t have a right to be involved in the decision-making. But as a trustee, I would highly recommend that you at least try to include the beneficiaries in some manner, in some way. And really well-administered trusts will have that interaction.

And you can always tell a bad trustee and a bad trust administration because there’ll be no communication between trustee and beneficiaries and that is always a problem.

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