For someone who is going through the process of establishing a trust during the estate planning process, selecting a trustee is a critical. After all, this is the individual who will be tasked with executing the terms of the trust in accordance with the settlor’s wishes.
According to Michigan law, one of the most critical responsibilities of a trustee is to maintain loyalty to the named beneficiaries. As such, this individual should conduct trust-related business not out of self-interest, but out of concern for the beneficiaries.
The unfortunate reality is that a trustee may not uphold this duty, which could be grounds for removal. Given the critical role that trustees play in upholding a person’s legacy, state law defines situations in which financial moves involving trust assets benefit the trustee are allowable. They are as follows:
- Financial decisions follow the terms of the trust.
- A court approves of the decision.
- Beneficiaries consent to the transaction.
- Actions are related to a contract that pre-dates intent to be the trustee.
- Transactions are permitted by law.
It’s also interesting to note that financial transactions do not have to be directly carried out by the trustee to be considered a conflict of interest. In fact, a trustee’s spouse, children, attorney or business could engage in actions that pose legal trouble.
Estate planning can be an incredibly complex area of law. While beneficiaries certainly deserve to have a responsive and honest trustee, it may not be clear if or when the law is being violated. As such, it may be best to discuss the details of a case with an attorney to determine whether or not a new trustee should be installed.
Source: Michigan Code of Laws, “Estates and Protected Individuals Code,” accessed July 2, 2014