Submitted by Anonymous on Sun, 10/17/2010 - 08:37
My dad set up a trust for me before he passed away but I don't get the actual money until I'm 25. For now the trustee manages the money and I get income. However, my income over the last year was much lower, I think, because the trustee made bad investments in the stock market and lost a lot of the capital. Things are a little better now, but still lower. So is it possible to sue a trustee under Massachusetts law for putting trust money in bad investments?
Possible to sue trustee
The short answer is yes, absolutely. As beneficiary you can always sue the trustee. The more important issue is whether you have a reasonable likelihood of success on your claim. That I cannot answer. But remember that in general, the trustee is going to be able to use trust funds (i.e. YOUR ASSETS) to defend him or herself, so seek counsel from an attorney who specializes in these matters before you proceed.
You could easily make a “bad but unavoidable” situation into a “bad and very expensive” situation very quickly. As beneficiary, the trustee owes you a duty of good faith and fair dealing. The trustee also owes the contingent remainder beneficiaries as duty as well, however, and that may be one of the issues here. If you were to die before you reached 25 years of age, then a different person or persons will become beneficiaries, and the trustee cannot focus so much on keeping you happy that the contingent beneficiaries are neglected. It is always a delicate balancing act, but in general a professional trustee has to act very cautiously. The trustee may not have obtained the best yield possible – but that is NOT the standard to which we hold a fiduciary.
There is the new Massachusetts Prudent Investor Act that may help your case, or may hurt your case. So yes, you can always sue. Before you go there, I would suggest that you make an appointment with the trustee and discuss these issues. I think that you will find that your returns reflect the market in general, and the fact that the trustee was acting conservatively to protect all the beneficiaries. If the trustee has acted inappropriately, then the trustee can be required to make the trust whole – meaning reimburse the trust for the lost funds. Good luck.
Attorney Peter Bernardin