Despite the fact that trust law can be very complex, it can also open the door to some wise estate planning options. On a basic level, trusts can be used to distribute assets to beneficiaries in accord with a grantor’s wishes. A trustee is assigned to oversee the administration of the assets included in the trust. Interestingly enough, trusts can be administered while grantors are alive or after they pass away.
Trustees are handed the responsibility of managing a trust in a fair and consistent way. Knowing this, do grantors have any claim to their assets if a trust is administered during their lifetime?
Not surprisingly, the answer to this question isn’t simple. In general, a grantor can revoke a living trust if it’s being mishandled and they are considered to be competent. One of the reasons a person may consider establishing a living trust is that their health could eventually prevent them from making sound decisions, so competency is obviously a relevant aspect of estate and trust law.
Once a person is considered to be incompetent, it may be easy to assume that the trust is solely under the control of the designated trustee. However, a conservator or person with powers of attorney may have the ability to revoke a trust if need be.
If no agent is in place to revoke the trust and a trustee is mishandling a living trust, who has the ability to hold the trustee accountable? Do the named beneficiaries have the ability to file a claim if the grantor is alive but deemed incompetent?
These are the kind of complex questions that may come down to state laws regarding trust and estate administration. Although it may be difficult for beneficiaries to sort through these issues on their own, a trusted attorney can help to ensure that a trust is handles according to the grantor’s wishes.
More than anything, these questions point to the importance of selecting a trustee. Since this person is going to be responsible for managing assets, he or she should be considered honest and reliable.
Source: Lake County News, “Estate Planning: Incompetency of a settlor affects trustee duties to death beneficiaries,” Dennis Fordham, Sept. 28, 2013