Episode 53: The Crooked Trustee

The Crooked Trustee

Hello, it’s Peter Klenk, Trusts and Estates Attorney, here to talk to you about what to do when you have a crooked trustee.

Yeah, what does that mean?

Actually, when I say crooked trustee, I’m talking about a trust has been formed. We’ll talk a little bit about that, and in all likelihood, you’re a beneficiary of that trust.

Now, why do I say that? Because when a trust is formed, the only interested people who can bring up a complaint are the people who have something to gain or lose by what’s taking place.

So, if you’re a beneficiary and you think that the trustee is doing something that is harmful to you, you have a right to raise a concern.

If you’re that person’s friend and they just don’t want to deal with it, well, you’re kind of stuck. You might even know that the trustee’s a criminal and they’re stealing money, but there’s not much you can do within the trusts and estates world because you’re not an interested party, right?

The people who are harmed need to bring the issue to light.

Now, let’s talk about some of these details. What’s a trust?

If you’ve listened to my other podcasts, you know that. But let’s just make sure that we’re on the same page.

A trust is an arrangement where a person, a grantor, has granted the power to a trusted person, a trustee, to hold assets for the benefit of somebody else, the beneficiary.

So you have a grantor, trustee, beneficiary. You have a trust.

You don’t need to register it. There’s no agency that oversees it. Trusts were formed to avoid the king, right?

So the idea is they’re not like LLCs or S corporations that were created through the government. These are things that were formed by a person. So that’s why they sort of live off on their own, right?

So if somebody forms a trust, the trustee, the person you trust to manage it, is supposed to take care of the beneficiary.

The beneficiary might be the trustee. It might be the same person, but we’re probably talking about a situation here where the trustee is an institution, a bank, or Uncle Bob or a friend, somebody that’s managing it for a beneficiary who, for some reason, thinks that trustee’s not doing their job, right?

Or doing something actually harmful, right down to just stealing. You know, they’re crooked.

So what do we do?

Because, well, you’re not supposed to go hit them with a baseball bat or anything, right? There’s got to be some place you can go to point this out.

Now, in general, can you call the police? Well, you can, but because this is a financial arrangement and because it is something that can go to court, the police in general are not that interested.

They’re going to tell you, “Look, there’s a court to go to to take care of that.”

They’re pursuing people that have done bad things where you can’t just personally run to court and take care of it. This is a financial matter.

Now, in every state, there’s a court that oversees disputes that have to deal with trusts. A very specific court, and there are rules and regulations.

And this is why, when we get to this point going forward, you’ll probably be talking to an attorney that focuses on estate and trust litigation because there’s a certain format one goes through to bring these disputes to the judge.

So what do you do?

Well, let’s just say, here are examples. You’re the beneficiary and you think that the trustee is actually stealing money.

I mean, they’re paying their gas bill out of the trust. They’re paying for their vacation. Maybe they’re just taking a salary that’s much too big, or maybe they’re investing in ways that are harmful to you, that benefit them, right?

So these are all things that the trustee is not supposed to do because the trustee is always supposed to act in the best interest of the beneficiary, right?

You might not agree with what they do, but as long as they’re acting in your best interest, they’re fine, right?

And then, of course, the trust might have some very specific terms. It might say you get $10,000 a month. Well, if you get your $10,000 a month, then you’ve been satisfied.

But most trusts are very broad, right? Take care of the beneficiary. It’s very broad, and then they have the discretion to act in your best interest in carrying out those terms.

Now, if the trustee is not doing their job, right? They’re stealing. Their salary’s too big. What do you do?

Well, you’re the beneficiary. You have a right to bring this to a judge.

So there’s a petition that needs to be filed because, remember, the court doesn’t know who you are.

So the petition is the thing that says, “Hey, I’m a beneficiary. I can prove it. Here’s a copy of a trust. It was filed. It was signed. It came into being. And here’s a trustee, and I am the beneficiary, so I have a right to bring this issue to you, Judge, because I have a concern.”

And my concern is, and this is where the petition goes off into what you think is going wrong, right? Salary, theft, whatever.

Now, once you prove that you are a person who has a right to go to court, well, then you’re a plaintiff, and it’s registered.

Then the judge usually has a short hearing or something to say, “Well, let’s hear the details here. Where are we going with this? What’s really going on?”

And, of course, the judge always wants to try to get things to settle. But if it can’t be, well, then they set a date, and now you have time and power to do what’s called discovery, right? To gather information and to prove your case.

Because remember, if you think that the trustee is stealing money, you might suspect it, but you probably don’t have the actual statements. You don’t have the checks. You don’t have the car dealer, right?

They probably didn’t talk to you and tell you, “Yes, I sold a Lexus to him using the trust money.”

So now your attorney has the power to go gather all that data because the judge is just sitting there. The judge is going to hear the case, but they don’t do investigating.

So your attorney is going to go out and gather the evidence and see what we find.

Now look, this could be everything from you suspected something was wrong, but the trustee was just being a jerk and not giving you any data, and we collect the data and it turns out that, nah, the trustee didn’t do anything crooked, but they’re a jerk.

Or it could be you find out outright theft, right? Abuse, all these things.

Now, a lot of the time, these things then meander toward some sort of settlement because once the trustee knows the jig is up, they may become eager to not be yelled at by the judge, right?

There might be some sort of way to settle this issue, but if not, you get your day, right? You get your day in front of the judge.

You get to prove your case, and of course, the trustee has the right to stand up and say, “Well, you’re wrong. You misunderstand,” or whatever they’re going to say, and the judge listens.

And that’s why it’s important to have your case in the right order, right? The evidence is submitted in the right format, the paperwork is submitted the way the court wants it, because of course you want to appear to be the adult in the room.

You’re the one who’s bringing the truth. You’re not just somebody coming in and wasting the judge’s time on some vendetta. You have legitimate concerns and you have proof for them, right?

So it’s important that everything is delivered in the right manner.

The judge is not a jury. You watch on TV and you see attorneys putting on big shows, yelling and screaming, rolling around, maybe to convince the jury.

Well, in general, judges, they don’t care, right? They’ve seen everything. They know it all. They don’t care if there’s yelling and screaming and throwing about.

They just want to hear the evidence, get to the end, and then get to the next case so they can go fishing or deer hunting or something.

So it’s important to get everything in the right format, order, and be presented the correct way.

And then the judge makes a decision.

And yes, a judge can make the person put money back in. They can remove the trustee and appoint somebody else.

There’s a multitude of different things the judge can do depending on what they find has been going on and the parties involved.

So that’s how it works.

If you’re a beneficiary, you do have a right to have your concerns addressed.

If you come to us, we have a department of three attorneys and paralegals. That’s all they do. They go to court and they finalize and take care of these disputes and matters.

So it’s something that our firm focuses on.

Not all firms do.

You can look around for trusts and estates, and a lot of trusts and estates attorneys don’t go to court. They focus on forming wills and trusts, which, that’s my department that I pretty much take care of at our firm.

We take care of the planning part, and then there’s probate. Some attorneys just sort of focus on handling the estates when people die.

The third department is litigation, going to court.

It’s a specialized skill, right? Some people are good at it, some people aren’t. Some people like it, some people don’t.

So that’s why you want to look for somebody who knows what they’re doing in court, enjoys it, right, and is going to go plead your case.

That’s what you’re looking for.

So that’s it. That’s a good introduction.

If you have any questions, or if you have a case in Pennsylvania or New Jersey, happy to talk to you.

If you’re in another state, you’d want to look for somebody who does that, who goes to court regularly and brings these disputes to the judge in the court in your state that focuses on these matters.

So that’s Peter Klenk talking to you about trusts and estates and these other fun things, death and taxes, of course.

Like and subscribe so that you can hear my soothing voice in the future about other death and taxes matters.

Be well and take care.