Control of Family Business and Conflict of Interest Dispute Story

You can predetermine “Reasonable Trustee Fees” – if only you are properly advised

A typical part of any living trust is a paragraph allowing payment of “reasonable” trustees fees. Most people establishing trusts do not realize that there is a great deal of latitude in what reasonable trustees fees are.

Trustee Fees Should be pre-established

Commercial trust companies typically will pay themselves 1 to 2% of the principal as trustees fees. Thus, a trust containing $1 million of assets could have $20,000 of trustees fees assessed against it. If the trust beneficiaries do not agree with the trustees fees they can always file a lawsuit with the probate court claiming that these are excessive but that is often an uphill battle. It is far better off to have set standards as to payment of an hourly rate or a fixed amount for the trustees fees.

If there is a family business involved in the trust, the principal amount of the trust can often be very large, in the millions, which gives a justification for higher trustees fees.

Beneficiaries are often Chosen to Be the Trustees of the Trust

Image of well-to-do couple toasting with wine in restaurantWe recently handled the case whereby a man passed away leaving for children and a second wife. His trust appointed the children as the trustees of his trust in those two children were also running the family business. Trustees have a fiduciary responsibility to do everything possible to protect the Beneficiaries: ALL of the Beneficiaries! We represented one of the children who was not running the family business and he was not appointed as a trustee.

Obvious Conflict of Interest Uncovered

It turns out that there was a conflict of interest situation in our opinion and we first compelled the two children running the business to provide a proper accounting for the trust and a proper accounting of the family business.

It turned out that the trust (at the instruction of the appointed trustees) was lending large sums of money to the business and then the business was using some of the money to pay exorbitant salaries to the two trustees who also worked for the business. Also the business, provided exotic sports cars to the two trustees who work for the business and at the same time the business was losing money. “Self-serving” runs afoul of the fiduciary requirements that must be upheld by a Trustee.

Image of two sports cars in a circular driveway

Trust & Probate Attorney, Certified Public Accountant

We were able to use our in-house accounting expertise to analyze the financial statements of the business end of the trust to determine these facts without having to involve outside certified public accountants. We pointed out the obvious conflict of interest to the attorneys for the trustees and continue to demand further accounting. We threatened to file a court petition to have the trustees removed and to have them what were apparently excessive trustees fees and excessive salaries. The attorneys for the trustees and the trustees determine that they would be better off to simply buyout our client so they could continue running the business and the trust without interference.

Fortunately, they were able to borrow enough money from the company credit line to pay our client her share of the estate in cash and litigation was avoided.

Are You the Beneficiary of a Poorly Managed or Fraudulently-Managed Trust?

If so, this is EXACTLY why I decided to share some of these real life stories. If you are the beneficiary of a trust that is being managed for personal gain, and NOT the benefit of ALL the beneficiaries, you can challenge the status quo and insist on an accounting and/or a change of trustee(s).

If this is similar to your circumstance, there may be a legitimate way to get this situation rectified. The sooner you seek experienced legal help, the sooner there will be the opportunity for a viable solution. I offer a free introductory meeting where you can air out your situation in complete privacy and learn of your various options and likely possible outcomes.

Free Introductory Meeting

Trust Probate Estate Lawyers Attorney David L. CrockettI encourage you to reach out to make that free introductory meeting with me by calling (949) 229-7034. We can sit down in the strictest of privacy and explore what is going on in your case. I will share with you my honest assessment of your case and suggest what options you might have. There is absolutely no pressure whatsoever. I am pleased to offer this complementary legal service to residents of Orange County and beyond.

If it is late at night or inconvenient to call me, please fill out my online case evaluation form. This form comes directly to my desk. I will contact you the minute I see it.

Conveniently located in Newport Beach near the John Wayne Airport

We are located near the Orange County California John Wayne Airport. My office is catty-corner from Fletcher-Jones Motorcars; —right behind the rear entrance of Newport Lexus on Dove Street. Here is a picture of my office building and a Google Map to get your bearings.

Attorney, Certified Public Accountant & Real Estate Broker

  

  

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