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Is a trustee misappropriating your funds?

A parent or grandparent will often set up a trust to provide for you after their passing. The trustee, or person who manages the trust, is most often the executor of the decedent’s estate or another family member. However, it is not uncommon for a trustee to mismanage the trust.

Misappropriation of funds occurs when the trustee uses the funds in a way that the beneficiaries of the trust have not authorized. As countless trustees have discovered, misappropriating funds is illegal and a punishable offense under the law.

There are four common ways trustees can misappropriate your funds:

1. Using funds for personal profit

The most common way a trustee misappropriates funds is by using the assets for his or her own personal gain. This is commonly known as “self-dealing.” Oftentimes, beneficiaries are unaware this is happening, because the trustee is growing the money in hidden investments and secretly reaping the profits.

2. Disproportionately benefiting one of the beneficiaries

There is likely going to be more than one beneficiary of a trust. If so, it is important that the trustee makes decisions that are in the best interest of all the beneficiaries. If a trustee makes a decision that gives a large advantage to one beneficiary, such as investing the money in the beneficiary’s company, the other beneficiaries must be aware and agree to the decision.

3. Failing to follow language of the trust

The terms and conditions in a trust can be confusing. Many beneficiaries of a trust give discretion to the trustee to follow the language in a trust as the decedent intended. If you are a beneficiary, it might be in your best interest to retain your own probate attorney to read over the terms of the trust and make sure your trustee is complying with those terms.

4. Mismanaging assets

A trustee has a fiduciary duty to the beneficiaries of the trust. This means the trustee must manage the trust in a way that is in the best interest of the beneficiaries. A trustee might do this by making careless investment decisions or failing to safeguard the assets.

Probate laws are complex, and it can be difficult to remove a trustee. If you believe someone is misappropriating your assets, speak to a trusted probate attorney today.

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