Trust Beneficiary Rights | Protecting Clients

Trust litigation lawyers, by default, become frequent advocates for the protection of trust beneficiaries and the assertion of their clients’ rights. Ongoing complaints regarding the systemic overreach of banks, trust companies and California licensed professional fiduciaries acting as trustees are made at administrative levels and litigated, for the most part, at the probate court level.

The growing conservatorship reform movement is animated by the all too frequent financial exploitation, physical and emotional abuse visited upon our nation’s most vulnerable citizens by conservators and guardians. This reform movement is worthy of its growing public attention. There’s no dearth of stories and examples of abuse. There is a dearth of institutional advocates. And individual advocates are limited by time, money and geographic reach.

Still, the stories must be told. And as they are told, with time, the spotlight will grow brighter in the legal, non-legal, media, public policy, and legislative fields. The need is growing greater for skilled advocates to advance the cause of protecting the vulnerable.

I’ve made personal efforts in this area by writing two books about elder financial abuse: The Wolf at the Door and Alzheimer’s, Widowed Stepmothers and Estate Crimes. Of course, far more needs to be said. Trustee abuse of beneficiaries may occur by the actions of unlicensed fiduciaries, licensed fiduciaries, banks or trust companies.

I’ve written extensively about trust beneficiary rights. These rights are important and critical to a functioning estate system. It is one thing when they are violated by unlicensed and unskilled fiduciaries. It is quite another when the violations are those of a trust company or a licensed fiduciary.

California licensed fiduciaries often assume the paid roles as trustees, guardians, estate executors, agents under a power of attorney and conservators for those who are mentally or physically incapacitated. They are licensed to serve California’s most vulnerable population. The system doesn’t always work.

The Professional Fiduciary Association of California identifies the obligation of a Professional Fiduciary:

The responsibility is unique, essential, and, often noble in nature. A fiduciary’s role is not merely that of business manager, decision-maker, or guardian. It is also a nurturing bond of trust, concern, and attentive caregiving. A fiduciary seeks to support mental and emotional well-being; reduce the stress of changing circumstances or unexpected events; and, most importantly, help each client, and their families, enjoy a fulfilling life.

These are fine and colorful words. Some fiduciaries take them seriously and apply them in everyday life for the people that they serve. Others don’t.

And it’s my job as an advocate to expose such abuse. While not naming names or locations, I want to describe a few cases where we’re asking questions whether these California trustees and their attorneys are meeting the “noble” purposes described by the Fiduciary Association.

A father, desiring to set aside assets to benefit his retirement age daughter, creates a trust directing the successor trustee, appointed at his death, to provide income and principal for her well-being. Her well-being is within a “health, education, maintenance and support standard.” In this case, the trustee is “a professional corporate trustee.” It advertises itself as “a trusted source,” “a preserver of family harmony,” with “high touch, high quality” services.

The father dies and the trusted source, and preserver of family harmony trust company takes over as trustee. Using its “high touch, high quality” services, the “Trust Committee” of the professional corporate trustee meets and approves a distribution of $2400 per month to the elderly sole beneficiary.

The trust beneficiary lives in low-income housing. Documents provided to the beneficiary show trust liquid assets in excess of $2,000,000. Money paid to the corporate trustee for trustee “fees and expenses” exceed disbursements to the beneficiary.

So, let’s step back a minute. I doubt that the beneficiary’s father ever read the corporate trustee’s website. But, somebody did. Maybe the trust attorney. Are the trustee’s actions preserving family harmony? Is this trustee really “a trusted source?” If so, a trusted source for what? Keeping an elderly beneficiary in low-income housing while there is more than $2 million in her trust?

Think about it – if her father could come back to life, would he say that this is the result that he wanted? That the corporate trustee really is doing “high touch, high quality” service? If this is really so, then the corporate trustee should advertise just what they’re doing for this elderly beneficiary. So, if California Professional Fiduciaries are a noble lot according to their association, are these actions noble?

A sick dying man, an octogenarian, is assisted by his two late middle age children, in the last months of his life. He creates a trust for the benefit of these two children. Much like the trust created for the elderly woman, it has a “health, education, maintenance and support standard.” The trust attorney, in a communication to her dying client, calls this a “General Needs Trust.”

The trust attorney identifies a California Professional Fiduciary to be the successor trustee after the man dies. The man dies in mid-July 2019. It appears that his trust has more than $7 million in assets.

So, let’s remind us what a California Professional Fiduciary does. The Association tells us that

a fiduciary’s role is not merely that of business manager, decision-maker, or guardian. It is also a nurturing bond of trust, concern, and attentive caregiving. A fiduciary seeks to support mental and emotional well-being; reduce the stress of changing circumstances or unexpected events; and, most importantly, help each client, and their families, enjoy a fulfilling life.

Okay. I’ll accept what the Association says. Now let’s see how this particular California Professional Fiduciary applies it. The trustee’s attorney sends a notice to the decedent’s children approximately one month after the decedent’s death. The notice includes a copy of the trust.

Three days after the trust notice, the successor trustee serves a “30-Day Notice to Quit and Vacate Premises” on the decedent’s two children. Their father has been dead 40 days. The California Private Fiduciary signs the notice as the “owner or managing agent” of the father’s trust property.

The children are informed that they must “VACATE THE PREMISES and surrender full possession to the owner/landlord” by September 25, 2019. They are warned that the California Professional Fiduciary will use “court proceedings against you … (which) could also result in a money judgment being entered against you for the balances due, plus costs and disbursements of suit, and attorney’s fees … allowed by applicable law.”

The children, of course, have no tenancy agreement. They’re not paying rent. They were in the premises assisting their father in his last months of life. Does it appear that this licensed trustee sees any important considerations outside the legal aspects?

The children are grieving. The prospect of moving is challenging. They meet with the trustee. They’re told that they will be lucky if they each receive $24,000 each year in beneficiary benefits. $24,000 per year from a $7 million trust to benefit them.

This California Professional Fiduciary will be given the opportunity to explain how, in the words of the Association, these actions are “a nurturing bond of trust, concern and attentive care-giving.” The trustee can also explain how these actions “support mental and emotional well-being, reduce the stress of changing circumstances or unexpected events; and, most importantly, help each client, and their families, enjoy a fulfilling life.”

The children sought a mediation with the trustee. The trustee’s attorney indicates that the trustee will not mediate until the two children vacate their father’s property. The trustee will move forward with eviction proceedings. The attorney adds that the trustee “is willing to provide (the beneficiaries) with a reasonable monthly distribution from the time they vacate and the completion of the mediation.” The mediation was cancelled by the trustee.

The actions of the corporate trustee and the California Professional Fiduciary remind me of the words of Abraham Lincoln with regard to slavery: “If slavery is not wrong, nothing is wrong.” If a trustee, whether corporate or for-profit licensed professional, can treat beneficiaries the way that these two have, then they can do anything.

Millions of dollars set aside for the benefit of children beneficiaries. One beneficiary living in low income housing, the others still in their father’s house. One beneficiary given income far below the poverty level and the others no income whatsoever.

If a trustee is to administer a trust “solely” in the interest of beneficiaries, how are these actions in any interest of the beneficiaries? Let alone sole interests.

I admire the efforts of Dr. Sam Sugar of Americans Against Abusive Probate Guardianship (AAAPG.net); the advocacy of Rick Black of the Center for Estate Administration Reform (CEAR); the activities of Spectrum Institute’s Disability and Guardianship Project; and the courage of Carole Herman of Foundation Aiding the Elderly (FATE) to bring a bright spotlight on fiduciary abuses and elder abuse.

We, of course, have a different role. We are lawyers who represent aggrieved beneficiaries and elders. We regularly enforce trust beneficiaries’ rights. We focus our practice in California’s largest urban areas.

We take substantial cases where we think that we can make a significant difference and there is a wrongdoer who can be made financially accountable for their wrongdoing or breach of duty. I’m grateful that fiduciary abuses are more and more coming to light.

If you’d like to speak with us about your particular case of fiduciary abuse, call us at Hackard Law (916) 313-3030. We’ll be happy to hear from you.