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A trustee could abuse their power by hiring friends and family

On Behalf of | Mar 3, 2021 | Trust Administration |

As the name implies, a trustee occupies a position of trust and authority. They have a duty to the trust itself and its beneficiaries.

Typically, the person who creates a trust will name a trustee whom they think is capable of managing the trust. Usually, the person creating the trust believes that the trustee they choose is someone who will uphold their obligations to the trust, to them and to the beneficiaries.

Unfortunately, both power and money can motivate people to do unethical things. Sometimes, a trustee will violate their fiduciary duty in the way that they handle the assets in a trust or its administration. Finding ways for a trust to financially benefit their friends and family is one example.

A trustee should seek to protect and maximize the assets they control

A trustee has a fiduciary duty, which means that they must put the best interests of the trust before their own wishes. The best interests of a trust usually include carefully maintaining its assets or liquidating assets for a reasonable price.

When a trustee brings in outside workers to improve, maintain or sell assets, they should look both at competency and costs when making that decision. Making nepotistic choices that benefit family members or friends could be a violation of that trustee’s fiduciary duty. They put the potential financial gain or professional experience for people they know ahead of what would be best for the trust.

Executors, beneficiaries or others may need to take legal action against a trustee with the wrong priorities, especially when the trust incurs financial losses due to poorly rendered services or excessive charges.

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