The Case of the Unhappy Beneficiary

So today I got a direct message asking me to contact someone, will call him Mr. Benny, who was unhappy about his sister’s behavior as a Trustee in his dead mother’s Trust. And while he has many grievances, he is fundamentally concerned in this call about getting an accurate accounting of the Trust assets (cash spending) and how it was used. With the concern that the Trustee is misspending the trust assets.

Apparently , the Trustee has hired an expensive attorney ($600 an hour out of Pasadena) and said attorney has already involved in the dispute. But what appears to have set Mr. Benny off is the idea that the Trustee is going to surcharge the estate for her expenditures as trustee, and potentially take a cut for her self. And he doesn’t think the Trustee should get anything, and that the Trustee isn’t worth it, nor have they done anything to deserve it. So let dissect it.

First, can a Trustee use Trust assets to pay expenses related to Trust Administration. Yes. Not shocking, since if a Trustee couldn’t,, not one would agree to be a Trustee. So what is really at question is whether the Trustee was acting reasonably and were the expenses actually expenses of the Trust.

Reasonable is in the eye of the beholder, and while $600 an hour for a Trust Attorney is a little on the Pricy side, I can’t say its so unreasonable that no Judge would allow it. Especially if the Trust is in LA or OC where fees tend to be higher. I’m not sure there is a rule of thumb here, but if I were to guess, if the Trustee’s fees are lower that an Executors Fees would have been in a Probate, I suspect no Judge will be outraged. And Probate administration fees can get pretty high. Probate Executors and Probate Attorneys easily make several thousand dollars on even simple cases.

What if, the Executor is misusing the funds? Well, then you probably have a case for Trustee Liability. They can’t pay personal expenses (or go on a wild gambling binge in Las Vegas) with Trust money. So its important to distinguish between a Trust expense (which may be high yet reasonable) and a Trustee using the Trust as a personal piggy bank.

Which Brings us to Trustee Compensation. Trustee compensation is where things get fact dependent. A trust can provide for Trustee compensation or it can say the Trustee works for free. Usually, when the expectation is that one family member or another will be Trustee , it might say no compensation. However, most Trusts are written to allow reasonable Trustee Compensation, an for good reason. Being a Trustee is work. Real work, with real responsibilities. And in a lot of situation, there is need to pay the Trustee to do the work. Again, what is reasonable compensation? Whatever a Judge won’t throw out. Good starting point is to look at the Probate Fee norms, since a Trust is often promoted as being less expensive than Court Probate, compensation probably shouldn’t exceed Probate Executor Compensation which in California is regulated by law.

So, Mr. Benny might be angry over nothing (or at least nothing he can run to Court about.) But what about the desire to get more information about how the Trust Money is spent. Well, he can sue for an “Accounting”. And that will force the Trustee to open the books to the Court, and by extension to Mr. Benny.

Which is what I offered to do for Mr. Benny. Because I’m an Attorney and that\s what we do. I suspect most Trust Attorneys would be happy to sue for an Accounting, since it often opens up the door to looking for other problems as you follow the money.

So if you are looking for a Trust Attorney to sue your Trustee for an Accounting, reach out and give me a Call, I would be happy to help.