Rogue Successor

What happens if a successor trustee named in a living trust goes rogue and refuses to carry out their duties? What if the same successor trustee takes action but does not follow the wishes of the original trustee? In this blog post, we are going to examine a hypothetical scenario of a rogue successor trustee and what can be done to make them perform.

The Basics of a California Living Trust

California laws allow individuals and families to create trusts that will spare their heirs the expensive and time-consuming probate process. When set up by an experienced attorney, a trust avoids probate completely saving tens of thousands of dollars to the estate.

California living trust is a private document. It means that it doesn’t get recorded at the local county recorder’s office. It doesn’t get filed with any other government agency. Parties involved in the trust get a copy of it, including a digital copy, and they are responsible for safeguarding the document. If a trust is lost, game over: welcome to probate.

Privacy is one of the living trust’s best features. If a trust was recorded, any member of the public would know how much assets you have, and how much money you are giving to your children, other family members, and charities. Your entire finances would be accessible to the public.  

At the same time, we get asked the following question: If a trust is not recorded, who is going to ensure that the successor trustee will do their job? What if they refuse to follow the original trustee’s wishes?

Let’s look into this.

Incentives to do the right thing

The good news is that in most cases, successor trustees discharge their duties without as expected. After many years of practicing in estate planning, we found that the common fear of litigation or disagreement between the parties of a trust is rather unfounded. Yes, lawsuits do happen, but they are not as common as many Californians think.

After all, a person doesn’t just sign up to be a successor trustee. They are picked by the maker of the trust. Naturally, they would choose someone they find to be honest, someone they probably know for many years. In the most typical situation, a successor trustee is one of the children.

In addition to having a moral and legal obligation to do right by their parents and siblings, California Probate Code section 15680 says that a trustee is entitled to be compensated as set forth in the trust. This is in addition to the successor trustee usually being one of the beneficiaries in the estate. It is in their best interests to follow the trustor’s wishes so they can get their piece of cake as well.

Successor Trustee As a Nightmare Tenant

Unfortunately, occasionally, we do run into a rogue successor trustee. There are many reasons why someone may decide to ignore the settlor’s wishes and break a contract (trust is, after all, a contract). Let’s examine one of the most common situations in which a successor trustee may decide to go rogue.

In this hypothetical scenario, a married California couple had 5 children. The couple’s estate included their house. One of the sons lived with the parents until both parents passed away. The parents had a living trust and the same son who was living with them had been named a successor trustee.

The trust says that the house must be sold upon the parent’s death, and the proceeds must be divided into five equal parts. However, the son, who is also the successor trustee, continues living in the house rent-free and refuses to initiate the sale of the house. He avoids other siblings’ calls and, when cornered, tells them he will hire a real estate agent to help with the home sale “son.” He just needs a few more months to save up some money and find another place to live.

A year goes by and nothing changes. The successor trustee becomes a nightmare tenant: he won’t move, and he won’t agree to sell the house. Since he is the only one who can sign the listing agreement, the other siblings feel powerless. What should they do?

While the process may not be what most families want, it is rather straightforward. It also happens to be the only solution that will eventually result in the sale of the property. The rest of the siblings must hire an attorney and sue the successor trustee. The attorney representing the siblings will present the evidence to the judge. As long as the living trust was prepared by an experienced attorney, the judge will rule to remove the non-performing successor trustee, which will allow what’s called “marshaling of the trust asset.” It’s legalese for locating and taking charge of all the estate assets.

As a result, the property can be sold and proceeds divided as intended by the trustor. However, before this can happen, there is one not-so-minor detail: if the ex-successor trustee is still refusing to vacate the property, they will have to be evicted just like any other tenant illegally occupying the home.