Unfair Fiduciaries | Abuse of Beneficiaries

I feel fortunate to represent abused beneficiaries seeking justice against trustees who appear to put their own financial interest over the beneficiaries they are duty bound to serve.

So, let me tell a story – drawn from real-life cases – some public, some confidential. In any event the facts have been changed sufficiently to protect any confidentiality concerns. And, how does the story unfold?

My assistant, Kelly, receives a call from a Bay Area caller. The caller, Cinderella, tells Kelly that she is the daughter of Mama Bear, a longtime San Francisco resident who died in 2017 at the age of 80.

Mama Bear had only one child, Cinderella. Cinderella and Mama maintained a close relationship throughout Cinderella’s life. Papa Bear, Cinderella’s dad and Mama Bear’s husband, died in 2010. Mama Bear carried on and created a new revocable trust in 2015 – “Mama’s Surviving Grantor’s Trust for the benefit of her Daughter, Cinderella (‘Mama Bear’s Trust’).” Mama told the San Francisco trust drafting lawyer, Dagwood, that she wanted to make sure that her 55-year-old daughter, Cinderella, was well taken care of.

Cinderella did not have a high-paying job, lives in a modest apartment in Daly City, and struggled each month to make ends meet. Dagwood suggested an income trust with the following provisions:

Trustee shall pay to or apply for the benefit of the beneficiary so much of the net income and principal from such beneficiary’s trust as the Trustee deems necessary for such beneficiary’s health, education, maintenance and/or support, taking into consideration any other resources or assets know to the Trustee and available to such beneficiary. Any income not so distributed shall be accumulated and added to the principal of such beneficiary’s trust.

Dagwood assured Mama that the trust company that he suggests as the successor trustee at Mama’s death – Fiduciaries Looking Out for Number One (FLONO) – had first-class experienced and effective trust officers. Mama let Dagwood know that if there was any principal left after Cinderella’s death, she wanted it to go to the Bear State University Foundation. Dagwood prepared the trust. Mama died not long after she made the trust.

FLONO took over as trustee and after the sale of some real estate had $3,000,000 in Mama Bear’s Trust. Cinderella made many inquiries to FLONO inquiring about trust distributions. FLONO made no inquiry whatsoever into Cinderella’s health, education, maintenance and/or support. FLONO let Cinderella know that its “Committee” had decided to pay Cinderella $36,000 per year in income and no principal. The Committee indicated that this was only good for one year and it would make its decision for distribution on an annual basis.

FLONO’s Market Reconcilement of the period ending July 31, 2019 showed Year-to-Date Assets of $3,000,000; Trustee’s fees and expenses of $42,000 and disbursements to Cinderella, the beneficiary, of $24,000. Cinderella shares this disbursement sheet with us. Stepping back just a bit it looks like Cinderella has received .8% of trust assets year to date and FLONO has received 1.4% for its fees.

I ask Cinderella, “Do you think that your Mama really wanted the trust company to receive more from the trust than you?” “No,” Cinderella said. “Mama said that I would always be taken care of – that I wouldn’t have to worry about money. What FLONO gives me is barely enough to pay my rent and medical insurance – let alone any of my other needs.”

So, it looks like left unchallenged FLONO will continue on its course – pay more to itself than the rightful beneficiary. We take a close look at the case – its documents – its circumstances – and make a decision whether we’ll move forward. We’ll discuss the various options for attorney’s fees, the likely venue of a trust petition, and the accumulation of evidence. Cinderella wants to move forward.

At Hackard Law, we do trust litigation. Not all of our cases look like the Mama Bear – Cinderella case. But some do.

We take significant cases where we think that we can make a substantial difference and there is a responsible party or wrongdoer who can be made financially accountable for their breach or other wrongdoing.

We focus our geographic reach on California’s largest urban counties – including Los Angeles, Orange, Santa Clara, San Mateo, Alameda, Contra Costa and Sacramento.

If you would like to speak with us about your case, then call us at Hackard Law (916) 313-3030. We’ll be happy to hear from you.