Many trusts include terms that allow them to remain in effect for years, if not decades. Trustees must manage resources, make appropriate distributions and communicate with beneficiaries as necessary.
They have a duty to act in the best interests of beneficiaries, which requires that they carefully manage trust resources. In some cases, beneficiaries may start to question how a trustee has managed or distributed trust resources. An annual report accounting for the trust’s assets can help beneficiaries determine if misconduct has occurred.
What happens if a trustee has failed to provide financial disclosures to beneficiaries?
Reporting failures can be grounds for litigation
In some cases, trustees are busy professionals who must balance administration responsibilities with their daily lives. They may not have legal representation, which may mean they do not understand their responsibilities.
In such cases, the failure to provide an annual financial report could be an oversight. Asking them for information about the trust’s assets and any decisions they made on behalf of the trust could lead to them providing the necessary report.
Other times, the decision to withhold financial information is intentional. They may have engaged in misconduct, and they hope that beneficiaries do not notice their misappropriation of trust resources or self-dealing.
If a trustee does not promptly remedy their failure to provide financial reports to beneficiaries, beneficiaries may have grounds to initiate trust litigation. They can ask the courts to compel the trustee to provide financial disclosures. They can also seek the removal and replacement of the trustee due to their breach of duty and California state statutes.
Understanding the rights of beneficiaries and the obligations of trustees can help people recognize when trust litigation may be necessary for their long-term financial protection. An attorney can assist with formal communication with a trustee and the process of filing a trust-related lawsuit.