Imagine you’re the beneficiary of your mother’s trust. You live in Los Angeles. You are the only child. Your mother also lives in Los Angeles.
Your father’s community and separate property went to your mother at his 2004 death. Your mother is the grantor, that is, the maker of a revocable trust titled “Mother’s 2012 Revocable Trust.” Mother is named the sole Trustee of her Trust.
Mother funds her Trust with $3 million in securities at its formation. The Trust allows Mother as Trustee to withdraw all or any part of the trust assets during her lifetime. Mother’s Trust provides that the Trustee shall pay the entire net income of the Trust quarter-annually to her, the Grantor.
The Trustee is also authorized to pay all or any part of the trust principal as the Trustee shall determine is reasonably necessary or appropriate for the care and happiness of Mother, the Grantor, during her lifetime. The Trust names you, Daughter, as the residuary beneficiary of Mother’s Trust.
The Trust provides that after Mother’s death, the Trustee shall pay to or apply for the benefit of Daughter all of the net income of Mother’s Trust, quarter-annually or more often in the Trustee’s discretion.
The Trust also provides that the Trustee shall at any time pay to or apply for the benefit of Daughter so much or all of the principal of Mother’s Trust as the Trustee deems necessary for her proper support, maintenance and health, taking into consideration any other resources or assets know to the Trustee and available to Daughter.
The Trust also provides that at Daughter’s death the undistributed balance of her trust shall thereupon be distributed to an organization benefitting the people of North Macedonia as designated by Clotilda, your mother’s hairdresser.
The Trust, amended shortly before your mother’s death, appoints Jim-Bob and Sons (JBS) as the successor Trustee. JBS is located in Alabama.
Your mother passes away in November 2017. JBS takes over as the successor Trustee. The accounts in the Trust total $3 million.
JBS “approves” a $2500 monthly distribution to you out of the Trust net income. You are not approved for any principal distributions.
In February 2018, Buck Dingle, the Trust Officer at JBS writes and informs you that the monthly distribution is solely in the Trustee’s discretion and that it will have to be renewed each year. According to Buck, you will have to send in a new request and JBS will recalculate the amount requested and present it to the Trust Committee for their review and consideration. You are cautioned that the Trust Committee’s approval is not guaranteed.
In February 2019, your receive an account and portfolio summary from JBS. You see that you, the beneficiary, received $30,000 in income for 2018 and JBS received $36,000 in income. In other words, it looks like your Mother’s Trust is benefitting JBS more than it is benefitting you.
These situations are not uncommon. Beneficiaries deal with out-of-state Trust Officers whose company entitlement to fees is not questioned while the true beneficiaries of the Trust, like you, have to jump through a series of hoops that end up with the caution that the Trust Committee’s approval is not guaranteed.
Your Mother is gone. Few would doubt that the real and overriding purpose of the Trust was to benefit you, your Mother’s Daughter, not the Corporate Trustee. You have no one to speak for you.
And, every time that you ask a question of the Trustee, the Trustee hires a lawyer to speak for it. And the lawyer charges the Trust. It doesn’t seem fair to you, does it? I suppose it depends on what side you are on.
Trustees have the right to be defended and Beneficiaries have the right to question. We’re usually on the side of aggrieved Beneficiaries.
There are remedies that can be pursued to change the Trustee, change the Trust, or both. These remedies are not easy to pursue. Sometimes the actions of a Trustee make it easier, particularly if the Trustee’s actions are clearly wrongful.
At Hackard Law we represent clients in substantial cases where we think that we can make a significant difference in making a wrongdoer financially accountable for their wrongdoing.
We litigate elder financial abuse, trust, probate and estate cases in the Probate and Superior Courts in most of California’s largest urban counties.
If you would like us to hear your story call us at 916 313-3030.