What are “red flags” that a trustee is problematic?

On Behalf of | May 17, 2024 | Trusts

Trusts are set up to preserve assets and protect beneficiaries – and trustees serve a critical function in both those areas.

So what happens if you don’t trust a trustee? In certain situations, a trustee’s behavior can and should raise “red flags” that warrant further investigation. Here are some key issues to watch for:

1. Failure to communicate

If you’re the beneficiary of a trust, you have the right to receive regular updates about the trust, and the trustee should be responsive to your inquiries. A trustee who is unresponsive (or outright secretive) may be trying to hide misconduct or incompetence.

2. Failure to follow the terms of the trust

Trusts have rules that have to be followed, and they’re legally binding. Deviations from those rules can undermine the trust’s purpose and harm beneficiaries’ interests. Another situation that can occur is favoritism. If the trustee seems willing to apply the trust’s rules loosely to one beneficiary but is rigid with others, that’s not acceptable.

3. Financial irregularities

Trustees have a fiduciary duty toward the trust and its beneficiaries. Are there unexplained discrepancies in the financial statements? Do you need help even getting the financial statements? Perhaps the trustee is making unauthorized withdrawals or transfers from the trust, or there are unusual cash transactions without clear documentation for their purpose. 

4. Mismanagement

A trustee doesn’t have to be acting willfully to raise concerns. Some trustees are simply incapable of managing the job. If the trustee is making poor investment decisions that cause the trust significant losses, or they fail to preserve assets, that can all be a sign that they should be replaced.

These are just some of the reasons that trustees can be challenged in court. If you believe that you may have a problematic trustee, it’s wisest to seek legal guidance.