Ask Phyllis!

Trustee Not Acting As A Fiduciary?

Dear Phyllis,

My aunt never had children, and her trust named her five nieces and nephews as beneficiaries. The eldest nephew was the trustee. Her home was on a flag lot, and the trustee lived next door. There was poor communication from the trustee from the start. As the sale occurred before the market changed, taking three months to sell the home was a long time. I was suspicious because the trustee’s wife seemed to be running the show instead of my cousin. We asked for a fiduciary audit and learned from the Realtor that my cousin turned down two higher offers because he picked the buyer he thought would be a better neighbor as they had children similar in age to his. The Realtor even had my cousin initial the prices of the higher offers and formally reject them. Now my other cousins want the difference to be taken out of the trustee’s proceeds. What are your thoughts on this?     J.L.

Dear J.L.,

Often people don’t want to hurt feelings and select the eldest as trustee. But really, it should be the most competent and trustworthy. When selecting multiple trustees, it is wise never to appoint an even number. When trustees make decisions, it’s important that the majority rule, or there could be a stalemate.

It was a great idea that the Realtor made it crystal clear that the trustee rejected higher offers. I have represented many trust sales and have never encountered this situation. One thing to be clear is the terms of the higher offers that were rejected versus the terms of the lower offer. Let’s assume the lower offer did not have better terms, such as cash, quick closing, or waiving the inspection contingency. Assuming the terms were similar, in this instance, perhaps the Realtor should have gone to the attorney for further guidance.

Your cousin had a fiduciary duty to act in the trust’s best interest and not his own. You will need to discuss this with the trust attorney, but this seems like an obvious case of him not taking his duties as the trustee seriously and putting his needs first. Best of luck to your family!

Phyllis

  Phyllis Harb