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Do California Licensed Fiduciaries Put You First? | Aggrieved Beneficiaries

Do California Licensed Fiduciaries Put You First? | Aggrieved BeneficiariesDo California licensed fiduciaries put you first? They should - this is what the law says. This is their duty.

The law says that a trustee is in a fiduciary relationship with the trust beneficiaries and must, therefore, administer the trust in the beneficiaries' best interest. The leading American work on trusts says that the trustee's duty of loyalty requires the trustee to administer a trust "solely" in the interest of the beneficiaries.

Family members that have trusts prepared for them are generally not trained in trust law, in fiduciary law or in accounting. They have loved ones. They want their loved ones to be taken care of.

They don't want unnecessary trust expenses. They don't want unnecessary delays. They don't want to pay the government any more than is required. And, finally they don't have a trust prepared for the benefit of a for-profit trustee.

They know that a for-profit trustee gets paid. This doesn't mean that the trust was built for a third-party stranger's benefit. It was built for their loved ones - their beneficiaries.

This is what makers of trusts think when they name a stranger as the fiduciary of their trust. They pay someone to advise them. The someone is usually an estate planning lawyer.

The trust maker's plan to benefit his loved ones doesn't always work. The following is an example - it's a combination of elements taken from several cases - all exemplifying trustees who are not administering trusts "solely" in the interest of the beneficiaries.

A multimillionaire, the father of two daughters, is dying. He is in and out of the hospital. He is on heavy medications. He wants to set up a trust to benefit his only two children, his daughters.

His daughters are in late middle age. Their ability to work is severely constrained by their physical impairments and disabilities.

The father, the maker of the trust, meets with an estate planning attorney. The meetings are at his home. He hires the estate planner. He pays the estate planner.

The father tells the estate planner that he wants to take care of his daughters, both in their 50s. They are his only heirs.

The estate planner creates a HEMS trust - a trust designed to provide for the health, education, maintenance and welfare of his children. The trust provides that the trust assets are to be divided 50/50 between his two daughters. The trust also provides that "My trustee must not exercise any power inconsistent with the beneficiaries' right to the enjoyment of the trust property in accordance with the general principles of trust law."

The trust also provides wishful language that the settlor wants his children to be good citizens. At this point his children's work careers are essentially over. They neither have the physical stamina nor the background education to secure high-paying jobs.

The estate planner makes absolutely no inquiry as to the current health, education, maintenance and support of the children. The estate planner fails to inquire and record the real medical, education, and required support histories for the children.

The estate planner sets up a 50 plus page small print trust. It is what sometimes is referred to as a "cookie-cutter" trust. It includes non-applicable and superfluous sections. It includes things like trust powers if the trust owns a "medical, dental, legal, veterinary, accounting, architectural, engineering or other professional practice." It looks like the estate planner pulled the trust off the shelf and failed to craft it to the real needs of the trust maker.

The estate planner suggests his friend, a licensed California fiduciary, as the trustee to take over when the father dies. The friend advertises himself as one of the region's experts in conservatorships. That's another topic altogether.

The father meets with the proposed trustee once or twice. The father doesn't know the trustee. The father receives a copy of the 50 plus page small-print trust. The father cannot read the trust line by line - he is too sick. Still, he signs the trust.

The father dies. He leaves about $6 million in the trust. At the time that he dies, his two daughters are living in his house. They moved to the house to help care for him in his illness. They didn't lease the rooms that they lived in - their father wanted them there.

The trust provides that the trustee may maintain any residence for the beneficiaries' use and benefit without regard to the proportion that the residence's value many bear to the trust property's total value. The trustee may permit any income beneficiary (both sisters are income beneficiaries) to occupy real property owned by the trust on terms or arrangements that the trustee determines, including rent-free.

The daughters meet with the successor trustee soon after their father dies. The successor trustee says that he wants them out of the house. They want to live in the house for a little while - a time to grieve and to go about living pursuant to their father's trust. The trustee says that he might distribute about $24,000 per year to each of them.

They leave the meeting with the trustee feeling ignored, belittled, and scorned. In their view, the trustee has treated them like they are interlopers. The trustee acts like he knows what's best. He is going to make them into good citizens. He is going to provide only minimal benefits from the trust.

In so many words, he is going to sit on the $6 million. There is no reasonable argument that trustees like this one are acting solely for the benefit of the beneficiaries. They're acting for themselves.

California fiduciaries like this one often charge $100 to $250 per hour for fiduciary services and about half of that for administrative and bookkeeping services. Percentage of asset rates usually start at .75% to 1.5% of assets under administration. From whatever perspective you apply, this trustee is a "for profit" trustee.

Soon after the father dies the trustee starts eviction proceedings against the father's daughters. His lawyer, when challenged, explains that "we need everyone out of the house as soon as possible so the trustee can finish marshalling assets." Somehow the trustee must do this, the lawyer says.

The house, of course, is not moveable. A house moving company is not in the plans to take the rather large home off its foundations and move it beyond the trustee's ability to reach it.

The trust says that the trustee can retain the house. The settlor didn't set up a trust to benefit a for-profit professional trustee that he met once or twice. He set up the trust for his children. He directed that his Santa Cruz house be for the benefit of his children. He says that this is for their recreation. He even tells the trustee to set aside a cash reserve to pay all expenses associated with the Santa Cruz house.

The trustee locks the beneficiaries out of the Santa Cruz house. A multimillion estate's assets will go to pay his fees and only an expressed trickle will go to the father's loved ones - the sister beneficiaries. From the trustee's actions to date, you would think that the trust says:

"I would like a California licensed fiduciary that I met once or twice to be the primary beneficiary of my estate. I want him to treat my two disabled daughters with appropriate disdain and as interlopers to my wealth.

I want the fiduciary to kick my children out of my house as soon as he can after I die and to lock them out of my vacation house. I want him to intimidate my daughters and to provide as little transparency as possible. Moreover, it is my preference that the licensed fiduciary spend money on attorney's fees and himself rather than to benefit my daughters.

And, I think that my for-profit fiduciary trustee has full discretion to mistreat my children in any fashion that he desires - the HEMS reference is just really a joke - one that shouldn't be taken seriously. He doesn't really need to know a thing about my daughters' health, education, maintenance or support.

I don't care if my children are impoverished or unable to work, the important thing is that the for-profit trustee sits on the money that I earned during my lifetime and gets sizable annual fees."

Of course, this isn't what the trust says. It is how the trustee is acting.

I hope that you gather from my tone that I don't like this. I don't like this at all. Human beings should be respected. The father who made this trust loved his children. He didn't love a for-profit trustee. He didn't even know him.

Would anyone in their right mind approve of this trustee's actions? Well, maybe other trustees who act just like him. I've written two books on subjects that I really care about - both about elder financial abuse and both focusing on wrongs in the trust and estate area.

The actions of a trustee like that described is another wrong. The trustee is self-righteous. The trustee is for profit. The trustee ignores the importance of family and how families are bound. The trust is not only about money - it is about real human beings who've lost their father, are in grief, are in need, and in turn are treated like they are burglars.

I was honored to write the foreword to Dr. Sam Sugar's book - Guardianships and the Elderly: The Perfect Crime. Dr. Sugar's book, while addressing conservatorships and guardianships, is a marvelous exposition of the ramifications of "a vulnerable but innocent individual ... with no rights or assets, fully under the control of a total stranger, who knows nothing about her preferences, religion, family or life."

For those who suffer these indignities, "it is a life-altering situation that is almost always terrifying for all involved - except for those who act as professional guardians for a living." While the two sisters in this case are not wards of the court, they are vulnerable. They are innocent.

They are under the control of a total stranger - a stranger that knows nothing about their preferences, religion, family or life. A stranger who knows nothing about their health, education, maintenance and support.

Abused beneficiaries hire us to fight, to litigate, and to bring the truth to light. This is not easy - errant trustees access trust funds for their defense. They hire lawyers paid by the trust funds. They fight against people impoverished by their own inability to assist beneficiaries.

At Hackard Law we work to assist abused beneficiaries against trustees who are ignoring or rejecting their duties. We take substantial cases where we think that we can make a significant difference and there is a wrongdoer who can be made financially accountable for their wrongdoing or breach of duty.

We focus our geographic reach to California's major urban areas, including Los Angeles, Orange, Santa Clara, San Mateo, Alameda, Contra Costa and Sacramento Counties. If you are an abuse beneficiary and you want to talk about your rights, call us at Hackard Law: (916) 313-3030.

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