If you are the beneficiary of a trust you have a legal interest in the trust assets and you have certain rights as a trust beneficiary; however, you are dependent on the Trustee of the trust to distribute assets to you according to the terms of the trust. What happens if a Trustee fails to distribute assets to which you believe you are entitled? To help answer that question, the Grand Forks trust administration attorneys at German Law discuss whether a beneficiary can force a Trustee to make distributions.
The Role of Trustee
Within the framework of a trust, the Trustee occupies a central and significant position. The Trustee is designated by the Trustor (the creator of the trust) through the trust agreement, the legal document that governs the administration of the trust. The overarching objective of a trust is to permit the Trustor to nominate someone – the Trustee – to safeguard and oversee assets designated for the well-being of third-party beneficiaries. The success (or failure) of a trust often hinges on the Trustee’s execution of their responsibilities during the administration of the trust.
Trustee Problems
The job of a Trustee involves a wide range of tasks such as asset investment, asset distribution, and meticulous record-keeping. Given that a Trustee wields authority over assets slated for eventual distribution to beneficiaries, the Trustee has a fiduciary duty towards the trust beneficiaries. While disagreements between a Trustee and a trust beneficiary are not unusual, most are resolved quickly. If a beneficiary believes that a Trustee is refusing to distribute assets that are owed to the beneficiary, however, a serious dispute may arise.
Mandatory vs. Discretionary Distributions
The first thing for a beneficiary to consider when a disagreement regarding a distribution arises is whether the distribution in question is a mandatory or discretionary distribution. Mandatory distributions are those that are clearly explained within the provision of the trust agreement. For example, the trust agreement might dictate that a distribution in a set amount occurs every month or once a year. Another common type of mandatory distribution is based on the trust income and requires some or all the trust income to be distributed on a yearly basis.
Discretionary distributions, on the other hand, leave it up to the Trustee to decide if a distribution should be made after a request from a beneficiary. The trust terms may provide guidance for the Trustee when making discretionary decisions; however, the Trustee often has the final decision-making authority.
Forcing a Trustee to Make a Distribution in North Dakota
A Trustee’s fiduciary duty requires the Trustee to make decisions that are in the best interest of the beneficiaries at all times. It does not require the Trustee to always agree to a discretionary distribution but does require the Trustee to consider the best interest of the beneficiary when deciding. In addition, North Dakota law provides a beneficiary with several important rights as well as a legal pathway to address issues, including the refusal of a Trustee to distribute assets. A beneficiary can petition a court and ask the court to order a distribution from the trust. If the Trustee is blatantly ignoring his/her duty as Trustee and refusing to distribute a mandatory distribution, the beneficiary can even ask the court to remove and replace the Trustee.
If you are a beneficiary and you are having problems with a Trustee who is refusing to distribute assets, consult with an experienced trust administration attorney right away.
Are You Having Problems with a Trustee?
Please join us for an upcoming FREE seminar. If you having problems with a Trustee who refuses to make a distribution from the trust, contact the Grand Forks trust administration attorneys at German Law by calling 701-738-0060 to schedule an appointment.
John grew up on a small livestock farm in west central Minnesota. He now lives in Grand Forks with his wife Maggie and their two daughters. In his free time John enjoys reading, taking his family to North Dakota and Minnesota state parks and rooting for all UND and Minnesota professional sports.
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