Can a Beneficiary Sue a Trustee and Win? What are the Grounds?

Can a beneficiary sue a trustee of a trust? Yes. If a beneficiary suspects that they are getting short-changed on their rightful share of the trust, they can sue the trustee.

We have clients who have been grossly mistreated and lied to by the trustee, who is usually a relative and a person they are supposed to trust. We also have clients with the opposite problem – they are trustees who are being unfairly accused by the beneficiaries.

Here are the typical situations where a beneficiary would sue a trustee:

Various Disagreements Where Beneficiary Can Sue a Trustee

Disagreements sometimes arise in trusts. Some trustees have a feeling of absolute power and act unreasonably towards the beneficiaries of trusts. On the flip sides, some beneficiaries mount unreasonable demands on a trustee. Some trust disagreements can be resolved without court intervention. This includes disagreements over sell vs. keep, valuation, who gets what, and items with intangible value.

Accusations of Stealing from the Trust

Trustees don’t always steal from trusts, but it happens often enough, and when it does, a try to reverse sue the trustee to try to reverse the damage to the trust. Trustees have access to the funds, and the temptation is too much to resist for some people. We’ve seen stealing by trustees on many occasions. A beneficiary bring an accounting proceeding against the trustee, to get a formal report on how the trust is being handled and try to get property back into the trust if it is missing. In the most egregious cases, such as where self-dealing and stealing from the trust can be shown, a beneficiary can sue the trustee for fiduciary removal. We can represent either side of the case – the beneficiary who is alleging stealing and the trustee who is saying that everything done in the trust was proper.

Beneficiary Was Left Out of the Trust or is Receiving a Smaller Share

When a potential beneficiary is cut out of the trust or is receiving a smaller share than they would have gotten without the trust, we can investigate whether the decedent was incapacitated, coerced or defrauded. We may also look into accusations of forgery or improper execution. We strive to get the evidence and argue the legal theory to get the best possible settlement or verdict for our clients in trust contests. If the beneficiary who can sue the trustee finds evidence of those things, then he takes the case to trial, to try to prove to the judge or the jury that the trust is invalid and should be set aside. We can also defend a trust that a beneficiary is attempting to contest – we can represent either side of the trust contest, whether the proponent of the trust or the objectant to the trust.

Unclear Language in a Trust

Unclear instructions sometimes occur when trusts are not carefully drafted. Whether the ambiguities work out to your advantage or disadvantage, a beneficiary who sues the trustee will make every effort to have the documents interpreted in their favor.

Kinship Disputes

When a relationship to the deceased is in question, a kinship proceeding arises and the beneficiary will need to prove their kinship and possibly exclude the kinship of others, including the trustee. In kinship proceedings, we may litigate over situations involving the need to look back multiple generations or unravel vague circumstances.

A beneficiary can sue the trustee in scenarios such as these:

• Relatives of the decedent are trying to overturn the trust
• Beneficiaries are claiming that the trustee has done something wrong
• A person with an interest in the estate is trying to cancel a gift the decedent gave to the trustee
• An heir is trying to cancel a beneficiary designation
• A beneficiary is challenging the trustee’s qualifications
• A spouse of the decedent is presenting inflated spousal elective share claims
• Beneficiary or business partner is claiming a share of the business

Trustees can be unjustly accused of taking funds or property of the trust and are accused of overspending on trust expenses. In such situations, a trustee may want to work with the beneficiary who is suing them to remedy the situation and put any misunderstandings behind them.

Trustee Qualifications

Beneficiaries of trusts sometimes have a personal problem with the Trustee. Trust litigation lawyers often provide a simple solution to this potential problem by posting a bond, which is like insurance on the trustee’s potential misconduct. A bond sometimes works to put the beneficiaries at ease. If a bond cannot be posted or if the beneficiaries want the Trustee out no matter what, it is up to the beneficiaries to prove why the trustee is not qualified. A trust litigation lawyer will do his absolute best to show that the beneficiaries’ claim to have the Trustee disqualified are without basis.

The Trustee’s Share in a Business

Trustees are often in business together with the decedent, having worked in the same company sometimes for decades, has significantly contributed to the company, having a share in the company or receiving compensation from the business. Non-trustees who are not involved in the business tend to challenge the trustee’s share, ignoring the years of hard work that the trustee put into the business. A trust litigation attorney will work hard to show the court that the Trustee is entitled to the share of the business and to the income and control of the business.

Albert Goodwin is an experienced New York trust litigation lawyer who has successfully represented clients all over New York City, including New York County (Manhattan), Kings County (Brooklyn), Bronx County, Queens County, Richmond County (Staten Island), Nassau County in Long Island, and Westchester County (the White Plains court).

As a trust litigation lawyer, I take pride in my record of success. Whether you are a beneficiary and you wish to sue the trustee because you feel that you are not getting a fair share of the trust or you are a trustee and you feel that you are being wrongly sued by the beneficiaries, you can let me let me handle the negotiations and proceedings, for a peace of mind that comes with knowing that your case is being handled by an experienced New York City trust litigation lawyer. You can give me a call at (212) 233-1233 or 212-233-1233 and we can talk about your situation.