3 Unusual Ways Trust Administration Can Be Complicated
The administration of a trust takes place after someone passes away and is intended to be an easier and less complicated mechanism for transferring assets to your loved ones, relative to the time-consuming process of probate. One of the big reasons administering a trust is considered less complicated is because the administration of a trust does not require oversight by a court. That is, unless a problem or legal dispute arises. If a proverbial hiccup occurs during the administration of a trust, the process can become quite complex in short order. Below are examples of how trust administration can suddenly go from straightforward to complicated.
When There’s a Breach of Fiduciary Duty
When it comes to administering a trust, the existence of a fiduciary duty arises when the actual trust is created. A fiduciary duty basically means that the trust administrator or trustee is legally obligated to act in the best interests of the trust beneficiaries. As a result, when a trustee takes certain actions that lead to personal enrichment and/or engages in self-dealing, this is considered to be a “breach” (i.e., violation) of their fiduciary duty. Common grounds for breach of fiduciary duty by a trustee include the following:
- Co-mingling outside funds with trust funds
- Colluding with certain beneficiaries to the detriment of others
- Failure to keep beneficiaries informed and up to date on administration of the trust
- Fraud by the trustee
- Incompetently mismanaging the trust
- Negligently mismanaging the trust
- Not being loyal to the beneficiaries
- Misappropriation of trust funds
- Stealing funds from the trust
- Self-serving acts
In addition to a breach of fiduciary duty, another potential complication with trust administration involves a beneficiary contesting the validity of the trust. If a trust contest is pursued, it could lead to an expensive and time-consuming legal battle over whether the trust was created in a legally valid manner and whether the trust is actively being mismanaged in violation of the trust document, thereby necessitating the installation of a new trustee.
The expense associated with a trust contest can damage the value of an inheritance and can result in the beneficiaries having to wait for an extensive period of time before they can officially inherit the assets of the trust. Furthermore, if the trust contest succeeds, it could result in the entire trust being declared invalid by a judge. This would mean the designated beneficiaries of the trust could very well not inherit the assets of the trust.
When the Family is Blended
The term “blended family” is used to describe families composed of individuals who have remarried and have children from prior relationships. A blended family can complicate the administration of a trust because, quite often, people in a blended family already have a will or estate plan that was created during the course of a prior marriage. These individuals invariably forget to update their estate plan creating uncomfortable and problematic scenarios such as prior spouses receiving the proceeds of a life insurance policy.
Get Help from a Trust Administration Lawyer
As you can see, there are many potentially thorny issues that can arise during the administration of a trust that complicate the situation greatly. Whenever a problem arises, from a trustee waiting too long to begin the trust administration process to a full-fledged trust contest, beneficiaries should make certain they have experienced and knowledgeable legal representation from an experienced attorney.
Contact Codi M. Dada for Trust Administration
Codi M. Dada is a respected and knowledgeable trust attorney who can help address complex legal issues that may arise with trust creation, trust administration, and so forth. His goal is to simplify the process of administering a trust and will guide you from beginning to end. He is passionate about what he does and will go above and beyond to provide his clients with reliable assistance. Consider calling today if you’re near Novato, CA, or the surrounding areas. Receive your free initial consultation now.