California Estate Lawyer Blog

When the father of my beneficiary clients, as trustee of the living trust created for them by their grandparents, finally complied with the court's order to submit an accounting, it told a story of trustee misdeeds, malfeasance and breach of fiduciary duty.

In California, a trustee has various duties as set forth in California Probate Code §§16000 et seq., known as the Trust Law. Among them is the duty to put the interests of the individual beneficiaries before his own (California Probate Code §16002) In addition, a trustee has a duty to follow the instructions of the trust concerning distributions (California Probate Code §16000). In an accounting the trustee, among the other items set forth in California Probate Code §16063, is required to list, in detail, on separate schedules, the assets of the trust, the income of the trust, the gains and losses from the sale of trust assets, the expenses of the trust, distributions from the trust and property on hand as of the date of the accounting. These were the schedules that I reviewed on behalf of my clients.

While I am licensed as a CPA (Certified Public Accountant) in addition to being an attorney, I practice law. That does not, however, mean that I turn my back on my skills as a CPA. To the contrary, I find those skills very useful in most of the areas of law that I practice in, including business, probates and trusts.

What I discovered by reviewing the accounting was that the trustee, the day prior to the accounting cut-off date, had repaid approximately $20,000.00 to the trust principal, as well as several thousand dollars as interest income. This was an attempt on his part to cover-up the fact that he had used trust funds for his personal benefit. However, being the greedy person that he was, he claimed at the same time and in the same accounting expenses and trustee fees almost exactly equal to the money that he allegedly returned to the trust accounts. How curious ...

I'll describe what happened next in my next entry.

Posted by Theodore M. Hankin | Permalink | Email This Post

Posted In: Accounting , Breach of Fiduciary Duty , Breach of Trust , Trust Litigation

Bookmark:

In my last post, I described the living trust situation wherein my beneficiary clients believed that their father, trustee of the living trusts established by their grandparents for their benefit, was wrongfully withholding their funds, breaching his fiduciary duty as a trustee. Here is what I did as an advocate and attorney to protect their interests.

I should point out that California Probate Code §17200(b)(7) permits a living trust beneficiary to seek a court order requiring the trustee to report and account for his activities with the trust funds. Knowing this, I wrote a demand letter to the trustee (my clients' father) informing him that I represented his children, that I had read the living trust, that the living trust required distribution to each child at age 21, and that he, as the trustee, had breached his fiduciary duty, as a trustee, to account to his children (the beneficiaries) and to distribute the funds. I further informed him that I would file a petition in the Superior Court of Los Angeles County (where the living trust was located and domiciled) to compel an accounting and distribution if my clients' demands were not met.

The trustee's initial response to my clients' demands was to delay and promise that an accounting would be forthcoming.

I will describe what happened next in my next post.

Posted by Theodore M. Hankin | Permalink | Email This Post

Posted In: Accounting , Breach of Trust , Trust Litigation

Bookmark:

In my Orange County, California estate planning practice, I am constantly amazed at the greed shown by family members towards each other. Although I have been in practicing thirty years now with substantial experience in trust, probate and estate litigation, I have seen no change in the willingness of one or more family members to short-change another family member.

Not too long ago I was approached by a grandchild of deceased grandparents. This grandchild had three siblings. All of them were told that when their grandparents died, the living trust that had been established for them by the grandparents would be held by their father, as trustee, for their benefit, until each grandchild turned 21 years old. At that time, the father was to distribute that grandchild's share of the living trust.

At the time that I was retained, all of the siblings had attained age 21 with oldest being age 28. The father had never rendered an accounting (a report of the assets that he started with, the income that he received, the expenses that he incurred, and the property that was on hand) to his children to show what he had done with their trust funds. Instead, he had repeatedly made promises that an accounting would be prepared shortly or that the income and expense information was at the accountant's waiting to be assembled into an accounting. The children began to suspect that their father was withholding their money and using it for himself, which is considered, in California, a breach of fiduciary duty by the trustee. I was asked to do something about this.

What I did will be in my next entry.

Posted by Theodore M. Hankin | Permalink | Email This Post

Posted In: Accounting , Breach of Fiduciary Duty , Breach of Trust , Trust Litigation

Bookmark: