Trust litigation typically involves conflicts between the beneficiary of a trust (the person who benefits from the trust fund) and the trustee, who has been assigned to manage the trust. Beneficiaries are entitled to a multitude of rights and legal remedies, which they can exercise if the trustee fails to distribute and administer assets in accordance with the terms of the trust.
At Staubus and Randall, we regularly help beneficiaries understand their rights and have represented both beneficiaries and trustees in court. If you are the beneficiary of a trust and you believe that the trust is being mismanaged or that the trustee has breached their fiduciary duty in some way, contact our office to discuss your situation with a skilled Dallas trust litigation lawyer.
For more information on trust litigation, please refer to this white paper entitled “Trust Code Toolbox for Locking Down the Runaway Trustee.”
What Are My Rights as a Trust Beneficiary?
Although trusts are designed to operate without any court supervision, trust beneficiaries have the right to file suit to enforce the express terms of the trust, as well as to enforce the legal duties owed to them by the trustee, referred to as “fiduciary duties.”
A fiduciary duty is a legal and ethical commitment made by a trustee to act in the best interests of the beneficiary and manage the trust in a responsible manner. Among these fiduciary duties owed to each beneficiary (including “remainder beneficiaries” who have only a future right to income or principal distributions) are the following:
- Duty of full disclosure
- Duty to account
- Duty to keep and maintain accurate trust records
- Duty of loyalty (including the duty not to self-deal)
- Duty to make the trust property productive
- Duty to reasonably exercise their discretion
Beneficiaries to whom any fiduciary duties have been breached have legal remedies that they can have enforced by a District Court, or in a larger county, by a “Statutory Probate Court” (such as Dallas, Tarrant, Collin, Denton, Harris, Bexar, or Travis Counties).
Some of these court-ordered remedies include the following:
- Compelling the trustee to take an action
- Enjoining the trustee from taking an action
- Ordering the trustee to pay back money or to restore property
- Ordering the trustee to provide a detailed accounting
- Suspending or removing the trustee
- Denying the trustee’s compensation
- Awarding a judgment against the trustee for actual and punitive damages
- Having the Court supervise the trust and oversee all transactions
In addition, beneficiaries can invoke the power of a court to seek an increase in the amount of their distributions from the trust, modify the terms of the trust, or terminate the trust and have the trust assets distributed outright. When a trust owns an interest in a limited partnership or a limited liability company, the trust litigation may involve claims against the general partner or managers of those entities, in addition to the trustee.
The fiduciary duties imposed on trustees have been described as one of the highest duties imposed by law. Trust beneficiaries have significant remedies, and the court has extremely wide latitude in enforcing those duties and in awarding attorneys’ fees to such beneficiaries that they incurred in enforcing those rights.
Reasons Why a Beneficiary Might Sue a Trustee
Some valid reasons why a beneficiary might take legal action against a trustee include:
- The trustee misappropriated funds in the trust or sold property for personal financial gain
- The trustee acted in a negligent manner (i.e., they made a risky investment using funds from the trust, which resulted in a poor return and the trust being devalued)
- The trustee used funds or property in the trust for someone else’s benefit rather than for the benefit of the designated beneficiary or beneficiaries
- The trustee showed favoritism toward one beneficiary over another
- The trustee refused to distribute assets in the trust without a legitimate excuse
If a trustee has deliberately abused their position for financial gain or otherwise acted in a questionable manner, then it is critical for the beneficiary to take immediate steps to enforce their rights and recover any assets or property that was mismanaged or sold.
The prospect of suing a trustee for a breach of fiduciary duty can seem daunting, especially if they are a close relative or loved one. It is not uncommon for beneficiaries to wonder whether taking legal action is worth their while, given the potential fallout.
However, depending on the circumstances of your case, filing a lawsuit against the trustee might be the best legal remedy available if a trust is being mishandled. If you are unsure whether legal action is appropriate in your situation, we highly recommend you speak with a seasoned trust litigation attorney.
Why Hire a Trust Litigation Attorney?
Trust litigation is a complex area of the law, and to have the best possible chance of securing a positive outcome, you will most likely need the help of a knowledgeable trust litigation attorney, preferably one with extensive trial experience.
Your attorney will help you navigate the legal process, defend your rights, and provide you with insightful legal advice. Because the trustee will likely have their own attorney representing them during legal proceedings, it is crucial to hire your own independent counsel, someone who has your best interests in mind.
Trust lawsuits tend to be contentious and emotional because they can pit family members against one another. Having an attorney in your corner can help reduce the potential for conflict and make it easier to resolve disputes efficiently.
Contact a Dallas Trust Litigation Attorney Today
Based upon years of litigation experience relating to trusts, Staubus and Randall provides advice and representation to individual trustees, corporate trustees, public and private charities and foundations, and representation to beneficiaries on any trust-related disputes, including fiduciary duties and risk management for trustees, suits over the validity of trusts, suits to modify or terminate trusts, and suits over the removal of trustees and for damages relating to breaches of fiduciary duties.
If you are considering setting up a trust, consider the pros and cons, including how you could avoid paying an inheritance tax. Call us at 214-691-3411 to learn more about our services or contact us online to schedule a consultation.