A rogue trustee might sound like an intriguing character from a thrilling novel, but it’s a serious issue in the estate planning sphere. A rogue trustee is someone who manages a trust but stops following the rules set out in the trust documents. Legally, this can constitute a breach of fiduciary duties. If this happens, the people who are supposed to benefit from the trust, known as beneficiaries, can be harmed. They are also responsible for taking action to remove or reprimand the rogue. The process of removing a trustee is but one of many trust disputes estate planning attorneys handle. If the trustee doesn’t fix their mistake, the beneficiaries might need to go to court to resolve the situation.
Trusts and Rogue Trustees
Many people choose to set up a trust to distribute their property after they pass away. Trusts are popular because they don’t require probate (a legal process to distribute a deceased person’s estate) and are more flexible than other estate planning options. Part of their flexibility comes from being able to appoint a successor trustee. This is someone who takes over the trust if the original person in charge won’t (or can’t) do so anymore.
The trustee’s job is to follow the trust’s instructions. They have some latitude to decide how best to achieve the trust’s goals, but they can’t outright ignore the trust’s rules and do whatever they want. A trustee who starts making their own rules instead of following the trust’s instructions gains the rogue trustee moniker. It is a convenient term that sounds exactly like what it is.
Not all rogue trustees need to be outed. It is possible for a trustee to make honest mistakes or to misinterpret instructions. The objective is to restore confidence in how the trust is managed. Sometimes this involves removing a rogue trustee, other times it involves and audit and some redirection.
A Real-World Example
A real (though anonymous) case at Clear Counsel Law Group involved helping an estate dealing with a rogue trustee. After the client’s mother died, the trustee of the mother’s trust sent a letter claiming they had the power to decide who got what and under what conditions. They didn’t distribute money to the client and the client’s daughter, saying they were ungrateful and didn’t do as they, the rouge trustee, wanted. The trust didn’t include language even approaching anything about beneficiaries needing to make the trustee feel appreciated. To make things worse, this rogue trustee used the trust’s money to buy themselves a property!
Acting swiftly, Clear Counsel asked the court to remove the trustee and hold them accountable for their bad acts. The court made the rogue trustee show how they had been managing the trust’s money. When the court saw that they had failed in their
Suspect a Rogue Trustee?
If you’re a trust beneficiary and think the trustee isn’t following the trust’s rules, it’s important to get help. A legal review can determine if the trustee has gone rogue and what steps to take next. Remember, a trust is supposed to be a secure way to handle someone’s estate, and the trustee has a responsibility to manage it properly. If they step out of line, they need to be stopped to protect the interests of everyone the trust is meant to benefit.
