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When trustees violate the terms of trusts

As the name implies, a trustee is someone in whom people place their trust. When it comes to trusts, a trustee is the person named to manage the assets according to the specific terms in the document. It can be a devastating thing to learn that a trustee has broken his or her honor and misused the faith people have placed in him or her.

The most common way a trustee can breach that faith is by misappropriating funds from a trust for personal use. A trustee in Michigan has a legal obligation to handle the assets as the settlor dictated in the trust documents. Trust funds are to be used for the benefit of the beneficiaries. Even if the trustee is one of the beneficiaries, he or she is not permitted to borrow from the trust unless the trust includes terms for borrowing. By doing so, a trustee risks criminal and civil penalties.

People who are setting up trusts are advised to avoid choosing trustees who have addictions, money troubles or issues with overspending. These types of people are often clever manipulators who may become the caregivers of an elderly person and use that relationship to be named trustee. This is more likely to happen when an elderly person is lonely or suffering from dementia, or when the family is not in frequent contact.

When beneficiaries in Michigan suspect that a trustee has violated the terms of a trust by misappropriating funds, they can consult an attorney for advice. An attorney who has experience with trusts will be able to examine the terms of the trust and represent the interests of the beneficiaries. Those beneficiaries may also profit from the help of an attorney in petitioning the court for removal of the trustee.

Source: lakeconews.com, "Estate Planning: Trustees who 'borrow' trust funds", Dennis Fordham, Feb. 18, 2017

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