Trust Beneficiaries are broken into two large categories, income beneficiaries and contingent beneficiaries. Frequently the interests of these two groups of individuals will differ early and often. Much is the case with a phone call I received recently.
A potential client called with an issues regarding a trust, of which he was a contingent beneficiary. This man’s father remarried later in his life, after the death of his first wife, this man’s mother. His father, the Decedent, passed away a few years ago. The Decedent left a his entire estate in trust for the benefit of his wife, for life, and the remainder to his children, the potential client and his siblings. The issue arose that the trustee the Decedent named, a local financial planner, invested the assets of the trust aggressively, trying to create the most income on a monthly basis. This man was concerned that a combination of this aggressive investment model and the turbulent nature of the stock market would leave little remaining assets for he and his siblings to inherit. He wanted to know if could do anything to limit the trustee’s decision. Fortunately, this man and his siblings do have available recourse.
A trust imposes upon the trustee a fiduciary duty of loyalty. Within this duty of loyalty is the duty of impartiality. The duty of impartiality states that when a trust names two or more beneficiaries, the trustee is under a duty to deal fairly with each group of beneficiaries. What this means for the man and his siblings is that they could have a cause of action for breach of the duty for impartiality.
However, the language of the trust is critical in determining whether or not to file an action for breach of fiduciary duty against the trustee. If the trust allows the trustee to favor one trust beneficiary over the other, then the trustee is within his rights to distribute more for the trust assets to support the income beneficiary as necessary. However, if the trust is silent on which beneficiary, income or contingent, should be favored; then a cause of action for breach of fiduciary of duty could be brought by the contingent beneficiaries.
If you are a beneficiary of a trust and believe you are being treated unfairly the best way to proceed is obtain a copy of the trust and contact an attorney for guidance. Ford + Mathiason LLP specializes in all types of trust litigation matters. Please do not hesitate to contact our office with any questions.