Managing a trust is a serious responsibility. The trustee needs to understand the intentions of the individual who drew up the trust (the settlor) and act in accordance with their wishes. They need to protect and manage the assets and keep beneficiaries appraised of what’s going on. Trustees may also find themselves in the position of butting heads with beneficiaries over trust management issues.
A recent case highlighting such a conflict occurred between a mother and two of her adult children. The mother in this case is Gina Rinehart, one of the wealthiest women in the world, who was managing a trust established by her father for his grandkids (her children). The suit that two of her kids filed against her claimed that she was mismanaging the trust and acting in a misleading way about the assets, including changing the date when they would be eligible to access the trust contents.
The family is still embroiled in the conflict, which has bitterly divided them; Rinehart apparently has agreed to step aside as trustee, but there’s no consensus yet about who will replace her. According to the article discussing the case, there’s a deed barring any non-family members from managing the trust, which leaves a smaller pool of people to select from, with individuals personally invested in the outcome.
The following are some of the issues this trust litigation case raises:
- The importance of a settlor naming alternatives for trustees, in case the current trustee refuses to continue managing the trust or must be removed for misconduct.
- Beneficiaries have a right to receive a transparent accounting of all matters related to the trust, including a full list of assets and any activities related to them (e.g. investments, distribution of assets).
- Removing a current trustee can be a long and difficult process. If possible, the trustee and beneficiaries should attempt to mediate their dispute prior to taking it to trial.
- A trustee can’t be removed simply on suspicion of mismanagement; there needs to be solid proof. This can range from tax documents to emails.
Resolving a dispute between trustees and beneficiaries requires the assistance of trusted estate lawyers. Ideally, lawyers will use their expertise to bring about a satisfactory conclusion for all parties before a given case heads to court and deepens rifts between family members. Unfortunately, when beneficiaries either know for sure or suspect that a trustee isn’t properly discharging trust-related responsibilities, sometimes a trial is the only option left.