Trustee and Beneficiary Conflict of Interest
Dealing with a trustee and beneficiary conflict of interest complications? Wood Law Group can offer clear guidance. Give us a call today for more information.
Trustees, Beneficiaries and Fiduciary Duties
A trust is a legal relationship created by the settlor (or grantor) in which a trustee holds and manages trust property and assets for the benefit of a beneficiary. A settlor chooses the beneficiaries of the trust as well as a trustee.
When it comes to managing trusts, Nevada places great importance on the relationship between trustees and beneficiaries. Trustees have to act in the best interests of the beneficiaries, but conflicts of interest can arise.
For example, the trustee can decide to sell an asset that will affect the beneficiaries negatively. Or, if the trustee is also a beneficiary, the trustee may want to manage the trust in a way that jeopardizes the interests of the other beneficiaries while maximizing their own.
The Wood Law Group has decades of combined experience with estate planning matters. Whether you need assistance with trust management or trust formation in Nevada, we can help. We are one of the leading estate planning law firms serving clients in Las Vegas and nearby areas.
Understanding Trustee and Beneficiary Roles
At the outset, understanding trustee duties and beneficiary roles is important. Beneficiaries don’t have any duties. However, trustees do, and they can be sued for violating them.
The Role of a Trustee
A trustee must administer the trust impartially and in the best interests of the trust beneficiaries. In fact, a trustee has a fiduciary duty to do so. Breaking a fiduciary duty can result in the trustee’s removal or civil liability.
Moreover, the trustee has to administer the trust per the terms of the trust agreement and in good faith. The trustee’s duties include managing and preserving the trust assets, treating all beneficiaries equally, as well as accounting for the trust’s assets to the beneficiaries.
Communication of any relevant facts to the trust beneficiaries is also the trustee’s duty. Trust assets also have to be kept separate and distinct from other property.
The Role of a Beneficiary
The trust’s beneficiary is an individual or a group of individuals for whom a trust is created. The settlor and the beneficiary can be different individuals. But, a settlor can also be one of the trust beneficiaries, just as in domestic asset protection trusts.
Beneficiaries in Nevada have several rights. Some of them include:
The right to receive distributions from the trust as specified in the trust agreement.
The right to expect fair treatment by the trustee.
The right to monitor trust activity and be informed of the trust administration.
If beneficiaries suspect the trustee breached their fiduciary duty, they can take legal action against the trustee.
Identifying Conflicts of Interest
It is crucial to detect and address conflicts of interest promptly to maintain the integrity of the trust and protect the beneficiaries’ rights.
A conflict of interest occurs when a trustee’s personal or financial interests conflict with their duty to act solely in the best interests of the beneficiaries. This conflict can manifest in various ways, such as:
Trustee Self-Dealing: Trustees may engage in self-dealing by making decisions that benefit themselves or their family members at the expense of the beneficiaries. For example, self-dealing can occur when a trustee uses trust funds to invest in a friend’s company.
Insider Transactions: Trustees may use their position to gain personal advantage by entering into transactions that may not be in the best interest of the beneficiaries.
Improper Investment of Trust Assets: Trustees must manage trust property and assets prudently, but conflicts of interest can lead to investments that benefit the trustee more than the beneficiaries.
Legal Implications of Conflicts
Nevada has enacted statutes to address conflicts of interest and promote fair and ethical trust administration.
For example, Nevada Revised Statutes NRS 164.705 to 164.775 contain Nevada’s Uniform Prudent Investor Act. These provisions provide guidelines that trustees have to follow, emphasizing the duty of loyalty, mandating trustees to act in the best interests of the beneficiaries and avoid conflicts of interest.
Other Nevada laws prohibit a trustee from engaging in transactions that result in personal gain or are adverse to the beneficiaries’ interests unless the trust provides for it expressly.
Beneficiaries can seek court intervention when there are concerns about a trustee’s potential conflicts of interest. Nevada courts have the authority to
Preventing Conflicts of Interest
Transparency and accountability are vital in the trustee-beneficiary relationship to prevent conflicts of interest from affecting trust administration. Beneficiaries have the right to receive accurate and complete information regarding the trust and its assets. So, to prevent conflicts, trustees can:
Provide regular accounts of the trust’s financial activities.
Disclose any potential conflicts of interest.
Act with the utmost honesty and integrity.
Exercise diligence and professionalism in their fiduciary duties.
By fostering transparency and accountability, beneficiaries can have confidence in the trust administration to protect their interests.
Legal Remedies for Conflict of Interest
Trustees have to take any potential conflict of interest seriously. If a conflict of interest is identified, certain legal remedies exist to resolve it.
Alternative Dispute Resolution
To address conflicts of interest, beneficiaries can go through mediation or arbitration.
Mediation or arbitration can be viable alternatives to litigation. These methods assist in resolving conflicts through negotiations or third-party interventions, preserving the trust assets and relationships.
Litigation and Court Intervention
When conflicts cannot be resolved through alternative methods, beneficiaries can petition the court to remove or replace trustees who are engaging in improper conduct.
Beneficiaries can consult with an experienced trust attorney to understand their rights and options in challenging conflicts of interest. By actively addressing conflicts of interest and holding trustees accountable, beneficiaries can safeguard their rights and maintain the integrity of the trust.
Guidance for Trustee and Beneficiary Conflict of Interest
When creating a trust, the grantor can decide how and when assets will pass to their beneficiary. That way, the grantor, with the help of revocable living trust attorneys, can ensure their wishes are strictly followed. But what if a trustee doesn’t meet their legal duties or a conflict of interest arises between the trustee and a beneficiary?
If that is the case, consider seeking counsel from a knowledgeable attorney rather than trying to deal with the matter alone.
Wood Law Group has an experienced team of attorneys who can carefully review your situations and expectations and help you through the conflict without hassle. We are well-versed in complex trust laws and asset protection strategies, making us an ideal choice for your needs. Contact us today to schedule a free consultation so we can start working towards resolving your conflict.