Are Fiduciaries Setting Themselves Up to Be Sued?

Litigation targeting estate-related trusts and trustees is continually increasing. The conflicts leading to these suits are often rooted in prior family dysfunction and slighted beneficiaries. In some cases, the trustee is at fault. When family members are appointed as trustee, they are often not able to manage estate assets in a manner that meets the high fiduciary standard. This failure subjects them to legal liability. In extreme cases, beneficiaries may become physically abusive in order to funnel assets for their benefit. A Massachusetts court recently heard a case where a violent and abusive son forced his father, suffering from dementia, to give him control of his estate. Because the father had also been acting as the fiduciary of a family member’s much larger estate, the abusive son was able to gain control of those assets as well.

There are a few solutions to help mitigate some of these issues. One possible option is to appoint co-trustees. In this case, a family member would be appointed as a trustee along with an institutional trustee. This ensures continued family control alongside professional management. Another possible avenue, the settlor may work with an attorney to draft a more flexible trust. Beneficiaries should have the power to remove a trustee if it becomes necessary. Finally, keeping lines of communication open is extremely important. Trustees and beneficiaries need to be able to pick up a phone and communicate issues when they arise.  

See Matt Miller, Are Fiduciaries Setting Themselves Up to Be Sued?, Barron’s, June 16, 2017.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.